Australian Tax Office reactivates debts placed on hold since 2020 for nearly 300,000 Australians

Australia’s tax authorities are pursuing nearly 300,000 taxpayers for debts they accrued three years ago – just as many families are struggling to make ends meet.

The ATO recovered some 290,000 tax debts that had been put on hold following the Black Summer 2020 wildfires and during the Covid pandemic.

The devastating fires killed dozens of people and destroyed thousands of homes just months before the pandemic sent the world into a years-long lockdown.

Indebted taxpayers were notified of the bill in mid-2022, but many were taken by surprise.

If a taxpayer owes money to the ATO, the government department will typically deduct the amount owed from their annual tax refund, except in “very limited” cases of financial hardship.

However, those who owe more than the refund and file the tax return themselves must pay the difference before November 21.

Debts that are unpaid begin to accrue daily interest from that date.

The ATO warned “as some time has passed since these debts have been put on hold, some taxpayers may not remember being in debt.”

“There could be up to 290,000 customers with debt ‘on hold’ who could see refunds used to offset in 2023-24,” an ATO spokesperson told News.com.au.

“It is important to recognize that we will only compensate for the value of the refund or credit, sometimes it is not economic for us to actively prosecute taxpayers who owe us money. We call this a debt ‘on hold’.

The debt remains due and payable by operation of law.

“We are required by law to set off credits against tax payables, including debts on hold, except in very limited circumstances.”

More than 14,000 taxpayers paid off $63.6 million of “on hold” debt this fiscal year, 2022-2023.

In the 2021-2022 financial year, $50 billion in repayments were made to 20 million Australians.

Debts were put on hold after the 2020 Black Summer wildfires and the Covid pandemic (pictured, the remains of a Wingello house destroyed by the fires)

Mark Chapman, director of tax communications at H&R Block, said “the timing of the ATO’s decision is bad.”

“This will put an additional burden on hard-working taxpayers who are already struggling with higher interest rates and higher inflation,” he said.

Data from the Australian Bureau of Statistics earlier this month showed that since 1999, working families have been hit hardest by their budgets.

In July 51 percent of Dissolve survey respondents said they would struggle to pay unexpected significant costs, up from just 41 percent in February.

To make matters worse, the difference between tax liability and refund will be larger this year due to a series of changes to the ATO.

Many Aussies’ tax refunds will be significantly lower this year, due in part to the end of the $1,500 low-and-middle income tax offset.

“There are a number of factors that may affect your final tax bill,” said ATO Assistant Commissioner Tim Loh.

“If you don’t get a refund, it simply means you paid the correct amount of tax throughout the year. If you receive a bill, it may mean that you have paid too little tax. That can be for various reasons.’

ATO’s decision to repair debt amid cost-of-living crisis criticized as ‘bad’ timing

For those unable to pay their debt on the due date, the ATO offers several solutions.

Taxpayers can apply for a payment arrangement where the debt is paid in smaller installments instead of all at once.

Otherwise, debt owners may seek a compromise between tax debts – with the debt reduced or removed in the event of extreme financial hardship, or a deferment of payment whereby the debt is recalculated and possibly reduced.