‘Traumatising experience’: ATO under fire for denying debt relief to at-risk taxpayer in robotax fallout
The Australian Taxation Office denied debt relief to a taxpayer despite acknowledging the person was in serious financial hardship and at immediate risk of homelessness, according to details released by the tax ombudsman.
The person, whose name was not disclosed, is one of many caught by the ATO’s widely criticised “robotax” scheme that has resurrected decadesold debts in pursuit of more than $15bn.
Karen Payne, the country’s top tax bureaucrat in charge of the complaints management service, said the lack of empathy shown in the ATO’s dealings with someone in difficult circumstances shows how an agency can wrongly prioritise its debt collection function over its obligation to support the community.
She said the ATO had also overlooked its discretionary and remedial powers when liaising with vulnerable people.
“It’s not the experience of everyone in the system, but for that individual, it’s a pretty traumatising experience,” said Payne, the inspector general of taxation.
“It’s important we get better guidance and better instructions to help people who are administering the system.”
After intervention from the ombudsman’s office, the ATO reversed its decision and the at-risk person was provided with a refund rather than having it eroded by an old debt.
The ATO had been ramping up its new debt collection scheme to eventually capture up to 1.8m entities, largely consisting of individuals, before recently pausing the part of the program aimed at recovering historical debts.
The amounts are still owing and
have not been cancelled.
While individual tax debt waivers are typically a matter for the finance minister, it is understood a decision to wipe the billions in debt would require approval from the whole of government.
Many of the debts far exceed the five-year retention period most taxpayers are required to keep records, generating complaints and raising questions over the fairness of the scheme.
The old debts are described as “on hold”, marked to be extracted from tax refunds, and were triggered by a change in ATO processes that previously filtered out debts if they were very old, small, and if the taxpayer was aged over 70 years or earning a low income.
The wider ATO program has captured a variety of people, including retirees, workers, welfare recipients and deceased estates, with the amounts owed as small as a few cents rising to many thousands of dollars.
The tax office has previously acknowledged a taxpayer communication campaign designed to raise awareness of the debts caused unnecessary distress.
An ATO spokesperson said it was important for taxpayers to know that the agency does not actively seek payment of on-hold debts and that taxpayers do not need to take action.
“However, we are legally obliged to use credits or refunds to reduce the amount of the debts on hold,” the spokesperson said.
While the ATO has repeatedly said it was legally obliged to pursue the program, Payne said the tax commissioner already had various powers to avoid unintended consequences, such as making people homeless.
“There are things you can do in the process of debt collection to make it a more humane, civilised experience,” said Payne.
“We can’t rely on parliament passing changes to fix every problem in the tax law.
“If you’re getting outcomes that you think were never intended to happen, then there’s a way for the commissioner to unilaterally remediate the law to produce sensible outcomes.”
Rob Heferen took over as tax commissioner from Chris Jordan at the start of March, leaving the veteran public servant to deal with the fallout from the troubled scheme.
Department reprimand
In response to the ATO program, the offices of the tax and commonwealth ombudsmen published a guide on Tuesday advising agencies on best practice for communicating with people about debts.
“While the law may require agencies to take certain action, agencies are also responsible for determining how they take that action in a way that minimises distress to affected and impacted people,” the guide said.
It advises agencies to: be transparent and accountable; tell people what the debt is and where it comes from; and provide clear information for requesting reviews, waivers and repayment arrangements.
The ATO spokesperson said the agency agreed with the principles and was committed to applying them.
As well as a detailed critique of the ATO, the guide also notes that the Department of Employment and Workplace Relations failed to apologise after a systems update resulted in the unexpected transfer of thousands of historical student debts from the department to the ATO.
“The ombudsman suggested the department apologise and help people access financial remedies where appropriate,” the guide said.
“Disappointingly, the department did not apologise and its website provides only very limited information about financial remedies for individuals.”
A departmental spokesperson said the government implemented a suite of mitigation and support measures for affected students including waiving all historical indexation on affected loans.
“The department has corresponded directly with all affected students as their loans have transferred to the ATO, including information about these and other financial remedies and information on how to check their loans,” the spokesperson said.
• Do you know more? Email jonathan.barrett@theguardian.com