The Australian Taxation Office has relaunched a campaign to retrieve billions of dollars of on-hold debts from taxpayers after conceding flaws in its initial approach, dubbed “robotax”.
Documents released to Guardian Australia show the new program is designed to raise $5.3bn from more than 325,000 taxpayers, largely consisting of individuals and small businesses, which includes sole traders.
Some of the debts date back to 2017, and were previously deemed “uneconomical to pursue”, remaining invisible to taxpayers for years. Many are linked to old business activity statements, GST payments and PAYG instalments.
While the median amount owed is $1,470.60, one person owes $109.9m, according to the documents. The unnamed “high wealth individual” has moved overseas and the ATO has been unable to recover the debt.
Under the new campaign, the ATO has started to reveal the details of these debts to taxpayers on their online accounts and via letters, and has marked them to be extracted from tax refunds, according to documents released under freedom of information (FoI) laws.
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The ATO describes the debts as “on hold” because they are to be taken from future refunds rather than payment demanded immediately.
However, the debts could be taken off hold after June 2026, according to the documents, opening the door for the ATO to start demanding immediate repayment after that date.
Interest will start accruing on the amounts six months after they are made visible to taxpayers.
Political sensitivity around renewed campaign
The new documents, which detail communication between the ATO and Treasury, reveal the political sensitivity surrounding the latest campaign, after the original 2023 scheme was suspended amid a public backlash that included a sharp critique from the tax ombudsman.
Guardian Australia reported extensively at the time on the stress it caused taxpayers, including many vulnerable Australians, who were abruptly informed they owed money from decades ago that they had no means of verifying.
While the new scheme deals with the same types of debts, it is limited to arrears put on hold from 1 January 2017, after the Labor government intervened last year to put the most controversial part of the original campaign – the decades-old debts – on ice.
The original campaign was widely derided for its uncaring, robotic nature, and was quickly labelled “robotax” by taxpayers, in a nod to the ill-fated robodebt scheme targeting welfare recipients.
The ombudsman criticised the former ATO campaign for not considering whether extracting an on-hold debt from an anticipated refund would put someone into a vulnerable position such as homelessness – an issue the ATO doesn’t address in its new communication with the government.
There is no reference in the documents to the frequent complaint made by taxpayers that the debts should never have been made invisible in the first place.
While the very old debts have been suspended, many people will be notified of debts that still predate the five-year retention period for which most taxpayers are required to keep records.
Debt collection with ‘revised communications’
The FoI documents include assurances from tax officials to the government that the agency has taken on board the ombudsman’s advice around “how to tell people they owe the government money”.
The correspondence says: “Whilst it may still surprise some taxpayers to see updates to their account balances, the ATO has revised communications as a result of broad consultation …”.
As at 31 August, the ATO is targeting 325,788 taxpayers who owe $5.3bn as part of the new campaign. Most are individuals and small businesses, though the list contains more than 51,000 “private owned and wealthy groups”, which owe $360m.
Although the average debt owed by this cohort is $12,814, the figure is likely inflated due to large amounts owed by a small number of taxpayers.
The median – or middle number – owed is just over $1,470, the documents show.
While there are more than 1.6 million taxpayers with about $19.7bn in on-hold debts, a large share of that amount predates 2017 and is therefore not subject to the new campaign.
The ATO’s debt collection methods have been under persistent scrutiny in recent years, resulting in a spike in complaints to the agency’s watchdog.
The tax office has engaged a private debt collector to chase taxpayers, including those receiving welfare. It is also heavily reliant on outsource call centres, where staff have complained about poor training and conditions, leading to deteriorating service.
