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The growing small business tax debt crisis 💼💸🛑 · Money News

• 0:00
  S1: There's more evidence tonight of Australia's small business sector being
• 0:03
  S1: under pressure, and the ATO remains to be chasing this
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  S1: extraordinary figure of $50 billion in unpaid tax, $36 billion
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  S1: of which comes from small business. Now, a new report
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  S1: warns that the ATO and US as taxpayers may never
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  S1: get some of that money back. And despite this program
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  S1: asking the tax office on a number of different occasions
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  S1: about how they are going and clawing back that money,
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  S1: it seems like they haven't made a dent in it.
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  S1: In fact, the total figure overall in unpaid tax is
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  S1: $100 billion. And the report today says that small businesses
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  S1: contributed $35 billion of the $54 billion total collectible tax
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  S1: during the 2024 2025 financial year. But the ATO doesn't
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  S1: seem to be that interested in clawing most of it back. Meanwhile,
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  S1: are calls to the Small business debt helpline are at
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  S1: record levels because business owners say the ATO would rather
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  S1: write off the debt then send them insolvent instead of
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  S1: working with them to pay it back. Anna Doland is
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  S1: a financial counsellor with the Small Business Debt Helpline. She's
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  S1: on the line for us tonight. Anna. Good evening.
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  S2: Good evening.
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  S1: We spoke to you in February when you were getting
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  S1: a record number of calls. Has that increased since then
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  S1: over the last few months?
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  S2: Yes it has. Just for example, in June we had
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  S2: nearly 40% more calls than the same time last year.
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  S2: So people are really struggling. We're hearing from a lot
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  S2: of small businesses in exactly the situation you're describing, which
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  S2: is tax debt.
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  S1: And meanwhile, the ATO is not making a dent in
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  S1: reclaiming this money, which the largest part is from small businesses.
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  S1: And why do you believe that to be the case?
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  S1: Why are they not doing more to right this debt
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  S1: off to to claim this money back? Let's talk about
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  S1: some of the flexibility or lack of flexibility they're showing.
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  S2: Well, you've hit the nail on the head. I do
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  S2: think flexibility is the main issue here. And I'll give
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  S2: you an example. We quite often have people calling us.
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  S2: They've been referred to us directly from the tax office
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  S2: who was saying the tax office won't enter into an
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  S2: official payment arrangement with them, and they're offering quite significant
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  S2: amounts of money. So, for example, they might be offering,
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  S2: you know, $500 a week, 1000 a week, but the
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  S2: ATO won't accept it because it's not their magical number
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  S2: that gets it paid off in three years. So they're
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  S2: telling people that they can't enter a payment arrangement when
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  S2: they could be collecting money from those people. So I
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  S2: think that's at least part of the reason.
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  S1: Okay. So as a taxpayer, and look, I realize there
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  S1: are small some small businesses that write to me all
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  S1: the time and say, every time you talk about this,
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  S1: you're letting some people off the hook because there are
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  S1: small businesses that have ignored the tax bill that is
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  S1: growing for quite some time. But I'm of the view
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  S1: that if the money could be paid off over, I wouldn't,
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  S1: let's say six, seven years. If we're getting the money back,
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  S1: we're getting the money back. And if someone has a
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  S1: better year the following year in terms of sales, they
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  S1: can probably pay it off quicker. But the ATO is
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  S1: not showing that flexibility anymore, in your view?
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  S2: No they're not. So really the magic number is three years.
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  S2: And if you can't pay it off in three years,
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  S2: they basically tell you that you can't enter into an
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  S2: official payment arrangement. And I do hear a lot about
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  S2: what you're talking about, which is this supposed financial advantage
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  S2: that businesses get by not paying their tax on time.
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  S2: I think that's really masking what's going on. Of course,
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  S2: there probably are people who are doing that for financial advantage,
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  S2: but most people have had their savings depleted by the
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  S2: economy and all sorts of things that have happened. And
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  S2: so if something unexpected happens, they get a giant fuel bill,
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  S2: for example, or they need to take time off work
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  S2: for illness, they're using their tax money that they've accrued
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  S2: for those urgent things, and then they're just not able
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  S2: to catch up because they can't get that additional flexibility.
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  S2: So that's not really financial advantage. That's not people trying
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  S2: to diddle the system. That's people who are really struggling
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  S2: and need that flexibility.
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  S1: And people who, sadly, Anna, are probably not taking anything
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  S1: home for their family.
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  S2: That's exactly right. We've talked to so many small business
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  S2: owners who are not paying themselves because they're trying to
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  S2: pay everything in the business and all of their employees,
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  S2: and they're not taking money home from themselves. So it's
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  S2: just a really tough situation.
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  S1: Now, if someone is given a payment plan, there is
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  S1: interest added on top right? Just explain how that works.
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  S2: Yeah. So at the moment, I believe the Ato's general
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  S2: interest charge rate is 11.43%, so it's an incredibly punitive rate.
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  S1: It's outrageous.
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  S2: It makes your tax debt spiral very quickly. So you
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  S2: go from having a debt that may have been manageable
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  S2: to a debt that's just unmanageable in quite a short
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  S2: period of time. And what that means is that because
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  S2: the ATO is now making it much harder to get
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  S2: any of those penalties and interest remitted, you go from
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  S2: having a manageable debt that you can pay back to
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  S2: an unmanageable debt. That means you need to consider insolvency
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  S2: or bankruptcy. And that, of course, means quite often that
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  S2: the tax office gets nothing.
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  S1: Well that's it. And that means the money is written
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  S1: off and the business goes broke. The staff are out
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  S1: of work. But the tax, the outdoing, the outgoing money
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  S1: is never reclaimed. So as a taxpayer, we miss out.
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  S2: That's right. So I actually had a caller just a
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  S2: couple of days ago who thought she'd paid off everything
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  S2: went overseas. She had some family issues and came back
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  S2: two and a half years later to a $200,000 tax debt.
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  S2: And she didn't know about it. She thought she'd done
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  S2: it the right thing and tried to get the interest remitted.
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  S2: The ATO said no, and so she was actually on
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  S2: the phone to us asking about bankruptcy. Well, as if
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  S2: they had remitted the interest, she would have been able
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  S2: to enter a payment arrangement and pay it off.
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  S1: But I mean, to be honest, if if there wasn't
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  S1: a $50 billion black hole with small business contributing $36
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  S1: billion of that black hole, if that if that issue
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  S1: didn't exist, we wouldn't be having this discussion. But clearly
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  S1: the ATO strategy is not working.
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  S2: That's right. I think collecting some money has got to
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  S2: be better than collecting no money, especially in a case
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  S2: when the small business is closed. So the situation is
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  S2: not getting worse, or in a situation where something genuinely
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  S2: unfair and unexpected has happened, there has to be that
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  S2: flexibility to provide the ability to pay things over a
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  S2: longer period of time to get some money instead of none.
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  S1: And at the same time, we've been talking about this Anna,
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  S1: over the last few months. The changes to the federal
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  S1: budget in May are, one way or another, have impacted
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  S1: a lot of small businesses, and I know there have
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  S1: been concessions in that space, but there are a lot
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  S1: of small businesses that pay and do business through trusts.
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  S1: Trusts are being taxed more, so they're probably these guys
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  S1: paying more tax than they have previously. And then suddenly
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  S1: this comes along, and this might send them to the
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  S1: wall very quickly before you go. If people are listening
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  S1: to this and want some help from your organization, what
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  S1: do they do?
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  S2: Well, whether small business debt helpline and you can call 1800 413 828.
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  S2: We're happy to give you information about what you can
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  S2: do about your tax, debt and any other financial issues
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  S2: you might be having with your small business.
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  S1: Anna, this was a good chat. I really appreciate your
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  S1: time tonight.
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  S2: Thanks for having.
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  S1: Me. Anna Dolan, the financial counselor with the Small Business
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  S1: Debt Helpline. Make no mistake, there is no organization or
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  S1: no factor that sends more small businesses to the wall
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  S1: in this country than the a t o.