ATO no longer treating debt the same as during COVID

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The cash flow positive position that businesses were in during the COVID-19 pandemic is a thing of the past, one expert has said.

According to the Australian National Audit Office’s 2024-25 ATO Management of Small Business Collectable Debt report, small businesses accounted for 66.1 per cent of all collectable debt.

“After reducing collection activities during the COVID-19 pandemic, in 2023–24, the ATO recommenced the application of a range of firmer actions, including garnishee actions, directions to pay, director penalty notices and disclosure of business tax debt actions,” the report reads.

Speaking with Accountants Daily, Corson Fiske ANZ managing partner James Leslie-Watt (pictured) said businesses are falling behind in their ATO tax debt repayments partly because they are not cognisant of the Tax Office’s increased scrutiny off the back of the pandemic.

“A lot of people are still using the old excuse of COVID as a primary issue to the business,” Leslie-Watt said.

“There’s no real sort of guidance for a lot of directors when they first set up a business … they’re not really setting aside their capital to service their tax properly. They’re seeing the Tax Office as their bank essentially to fund the business.”

Accountants need to tell their clients that if they do nothing, they are going to face director penalty notices and garnishees, he said, and going above and beyond for clients to get them into a better position will be appreciated by clients.

He stressed that accountants must become strategic advisers rather than being an “end of year accountant looking backwards”, Leslie-Watt said.

“That’s the primary issue …  is that their current relationship with their accountant is more backwards, looking rather than forward-looking. They look at all the mistakes that happened over the course of the financial year, rather than having a set plan, looking forward and projecting for the financial year.”

Accountants must start looking at their client books and identifying who is behind on their tax debts for income tax, GST, PAYG and superannuation, and having a conversation about the lead-up into May next year on their overall tax debt position, he said.

“They need to look at having a set plan, going forward, to be able to address all the issues before … they end up on the receiving end of the stick, with tax debt collection from the ATO.”

28 July 2026
Carlos Tse
accountantsdaily.com.au