ATO threatens bankruptcy over business tax debts
More small businesses face bankruptcy after the Australian Taxation Office (ATO) vowed to take tough action to recover $6.5 billion in combined tax debt.

Outgoing Tax Commissioner Michael Carmody has reaffirmed the ATO’s tough stance, saying the level of debt at the small end of the market “is just not acceptable”.

The ATO will undertake a telephone blitz in early 2006 to contact – at home and after hours – some of the 800,000 micro and small-business owners who owe tax, Mr Carmody told a Senate estimates committee hearing.

The ATO has already taken legal action against 30,000 taxpayers who ignored demands to pay their tax debts. “Just the sheer number of smaller debts and how we manage those is the issue most exercising our minds,” Mr Carmody told the hearing.

He confirmed action had been taken to wind up and bankrupt 581 businesses in the first three months of this financial year, with small business representing a “fairly significant proportion”.

That number was almost double the 265 bankruptcy petitions in the first quarter of 2004-05, and Mr Carmody warned similar tough moves would be seen across every sector of the ATO's activities.

Mr Carmody said the ATO had taken steps to garnishee trade creditors and merchant card facilities. “The big challenge for us is the sheer number of those smaller amounts of debt.”

At the same hearing, the Inspector-General of Taxation, David Vos, said the ATO had been lenient in dealing with small business in terms of the time to pay. "The rorters – the serial non-payers – need to be singled out and dealt with."

His review into the ATO's treatment of small-business debt last year found that of the 800,000 businesses with debts, 500,000 owed less than $25,000. And of these, the majority owed less than $1000.

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