Tax man chasing $34bn

MORE than a million Aussies are about to be hit with a tax bill, and experts are warning now is not the time to ignore the debt.

The Australian Taxation Office’s temporary pause on pursuing debt during the pandemic has ended, and it is cracking down to recoup some of the $34bn-plus owed.

With tax debt interest rates at 8 per cent tax lawyer and former tax office director Tania Waterhouse said people who ignored their debts could end up bankrupt or paying back double.

Ms Waterhouse said most of her clients were small business owners and tradies who were doing it tough – and all were male.

“I have no female clients, it’s males that put their heads in the sand,” the Waterhouse Lawyers partner said.

“One of the big issues is that tax debt can double. The principal debt may be $100,000 but with general interest charged (GIC) the taxpayer (may have) to find the means to pay $200,000.”

GIC is currently at 8 per cent a year – more than twice the average home loan rate.

With this level of interest, a $100,000 debt ignored for nine years becomes $200,000 – and any legal costs are added.

Latest figures show the tax office was chasing $34.1bn of debt in the 2019-20 financial year. This has likely increased since, as the tax office more actively pursues debt after backing off during lockdowns.

“(For some small business owners,) instead of taking formal tax recovery proceedings in the court against the company, they are issuing DPNs (director penalty notices), which are issued to the director or directors of the company,” Ms Waterhouse said.

“They are personally liable.

“If they have got a $300,000 tax debt, which is not unusual, and no assets and they are earning under $70,000, they are better off going bankrupt and trying to start again.”

Tax office deputy commissioner Vivek Chaudhary said the agency could tailor a solution to a taxpayer’s unique circumstances. “What is critical is that taxpayers or their representatives talk to us and respond to our calls,” he said.

Latest tax office statistics reveal more than 19,800 Australians claimed tax deductions for litigation costs associated with managing their tax affairs in the 2018-19 financial year.

The most litigious postcode in the country was 2170 in Western Sydney where 245 people claimed a deduction for legal costs. In Tasmania it was 7034 – which takes in Deloraine and Elizabeth Town – which topped the list with 97 people claiming litigation costs.