Australians owe more debt than ever to the ATO
The dollars owed are mounting. There is now almost $24 billion in debt owed to the ATO. (ABC News: Giulio Saggin)
Australians owe more debt than ever to the tax man, with the Australian Taxation Office’s annual report revealing collectable debt rose to almost $24 billion last financial year.
Collectable debt has now reached $23.7 billion, up from $20.9 billion in 2016-17, the majority of which is still owed by small business.
The ATO said almost $10 billion of the $24 billion in debt owed is subject to objection or appeal, $1.1 billion is “uneconomical to pursue” and $3.7 billion is “irrecoverable at law”.
The annual report also reveals the agency collected more company tax from large corporates that had higher profits, and thereby beat its budget revenue target.
Net tax collections hit $397 billion in 2017-18, up $37.4 billion (10.4 per cent) over the previous year. This was $12.5 billion above the amount budgeted, and largely due to company tax collections increasing by $16.1 billion in 2017-18.
But to avoid double taxation, shareholders get a credit for the tax already paid by the company on the dividend part of their income. The ATO notes in its annual report that this could have future impacts on revenue.
“In reality, company tax receipts can create an entitlement to franking credits for resident shareholders that could offset a portion of these effects in future periods,” the ATO said.
|Debt subject to objection or appeal||$8.2b||$8.0b||$9.7b|
|Uneconomical to pursue||$1.7b||$1.4b||$1.1b|
|Irrecoverable at law||$3.1b||$2.5b||$3.7b|
Source: ATO annual report 2018
Individuals ‘nudged’ to pay more tax
There were 11.5 million individuals (that is, those not in business) in 2017-18. Total individuals tax collections grew by $13.1 billion for the year, which was $2.4 billion above budget and reflected stronger employment growth, the agency said.
The ATO has started using real-time analytics to send ‘nudge’ messages to taxpayers while they are lodging their online returns.
It said about 230,000 taxpayers got the nudge to review specific items and that this alone resulted in the agency collecting $24 million in revenue.
Take up of online lodgements, via myTax, increased 9 per cent, with more than 3.5 million from self-preparers. This was about 20 per cent of the 17.4 million electronic lodgements received for the year.
Total tax refunds were $102.3 billion, up 3.2 per cent from 2016-17. This included income tax refunds of $42.5 billion and activity statement refunds with of $59.8 billion.
‘Unauthorised access’ by ATO officials
The ATO has an operating budget of $3.3 billion and 20,435 staff.
A recent review of the ATO’s fraud control management by Inspector-General of Taxation Ali Noroozi – which was initiated after a scandal involving one of the ATO’s former highest-ranking officers, Michael Cranston, and the alleged abuse of his position – found the ATO needs to better manage conflicts of interest.
In 2017-18, the ATO also conducted its own internal fraud investigations. It said it assessed 635 allegations or reports, of which 162 were substantiated, 200 were unsubstantiated, 61 were not able to be determined and 212 remain open at the end of the year.
Unauthorised access – that is to an employees’ own records, or those of their family members or other people they are connected to – continues to be the largest category of substantiated allegations, the ATO said.
Taxpayer complaints and objections
In 2018 there were 36,572,123 returns lodged and of those 361,107 were adjusted after audit.
The ATO received 20,241 complaints, which is inclusive of complaints to the Inspector-General of Taxation, and slightly down on the year before. The majority (3,096) related to “form processing”. There were 1,488 complaints relating to debt and payments, and 533 relating to lodgement and penalties.
Taxpayers can also formally object to ATO decisions. There were 24,350 taxpayers who objected to ATO decisions (about the same as the year before) and 478 of them who proceeded to litigation.
Where the ATO gets it wrong, taxpayers may be entitled to compensation. The total amount of compensation paid in 2017-18 was $409,035 – about half the amount paid out the year prior. The median payment was $495 and the average was $7,575.
Across all taxpayer groups, the ATO reported that it “completed” 3.4 million compliance activities over the year, raising $16.9 billion in total liabilities and collecting $11.8 billion in cash (some relate to liabilities raised in previous years). This is compared to total liabilities of $15.6 billion raised and cash collections of $10.2 billion in 2016-17.
Fight against multinationals
The ATO’s main group hunting large corporates and multinationals, the Tax Avoidance Taskforce, raised $2.8 billion in liabilities, it said, with more than $1.3 billion from multinationals and public groups and more than $1.1 billion from wealthy individuals and associated groups, including trusts and aggressive tax planning, the agency said.
But the ATO has in some cases opted to settle with some large companies that dispute tax bills, rather than fight it out in court.
|Client group||Settlements (number)||ATO original tax bill||Settled amount||Variance (per cent)|
|Private owned groups and wealthy||287||$454.6m||$180.6m||60pc|
|Public and multinationals||96||$2.8b||$2.1b||26pc|
Source: ATO annual report 2018
In the public group and multinational business line the tax man settled with 96 companies in 2017-18. It had originally hit these companies with $2.8 billion worth of tax bills. But it ended up collecting about $2.1 billion.
In the privately owned and wealthy groups business line, it had 287 settlement cases. It originally hit them with $455 million worth of tax bills, but settled on less than half at $181 million.
The agency’s total legal expenditure for 2017-18 increased by $2.1 million (or 2 per cent) when compared to the previous year, with more taxpayers requesting the ATO fund cases in insolvency matters that impact a range of creditors including employees.