8 April 2024

The ATO's version of Robodebt still being discussed – but Ombudsman lays down law

| Chris Johnson
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Australian currency notes in different denominations

The ATO’s recent debt-collection methods have been compared to Robodebt. Photo: File.

Media reports continue to keep a spotlight on the Australian Tax Office, which came under renewed fire over its aggressive pursuit of old debts in a manner many compared to the ill-fated and illegal Robodebt scheme.

In fact, the ATO campaign has become known as Robotax.

Late last year, thousands of Australians were issued ATO letters advising of tax debts most knew nothing about.

Guardian Australia led an investigation revealing the ATO letter campaign was hoping to collect more than $15 billion from up to 1.8 million entities – mostly individuals – from debts that were in some cases said to be decades old.

Some debt notices were for a few cents, while others racked up thousands of dollars.

Similar to Robodebt, the onus was on the recipients of the notices to prove they didn’t owe the government the debt, and they were given limited time to repay.

Following the public airing of the distress these letters were causing many individuals and households, the ATO stopped issuing the letters and apologised to taxpayers.

READ ALSO Energy bill relief likely to be extended in Federal Budget

But it didn’t drop the plan. It just paused it, with the debts still owing and on hold – meaning they are not being actively pursued.

Policy had changed to no longer overlook debts that were very small or very old.

Such debts would instead now be taken from current tax refunds.

The ATO insisted it has no discretion to ignore tax debts.

But the taxation ombudsman has now said otherwise.

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) Karen Payne recently said the ATO’s scheme should have learned from past lessons and it should have had more regard for taxpayer rights.

She said the ATO Commissioner had remedial powers that allowed for modifications of how tax law was applied.

These can be used to avoid chasing tiny sums of money or debts that are so old that a taxpayer has no way of verifying them.

Neither should tax pursuit schemes make someone homeless. The ATO has discretionary powers to waive debts due to hardship.

Ms Payne said the power was underutilised and often misunderstood, but it was in place for the commissioner to “unilaterally remediate the law to produce sensible outcomes”.

The ATO can also advise the Federal Government that it believes a category of debts should be waived through legislation.

In response to the ATO reactivating or offsetting very old debts, Ms Payne and the Commonwealth Ombudsman Ian Anderson recently published a how-to guide for public service agencies charged with debt collecting.

Titled How to tell people they owe the government money – Best practice principles for notifying people about debts, the guide makes it clear that telling someone they owe the government is a serious responsibility and they are cautioned to make sure they keep the impact on people at the centre of their approach.

READ ALSO Government agencies given guidance on how to collect debt with decency

“Being told you owe the government money can be a worrying, traumatic, confusing, frustrating and stressful experience,” the report states.

“It can negatively affect people’s wellbeing. The impact of being told you owe the government a debt can be increased if the debt is unknown, it’s old, it’s unexpected, or if there is limited information about the reasons for the debt, who to contact for more information or how to challenge the debt.

“Agencies must act (and are expected to act) in accordance with the law. They are also obliged to help people and act in the best interests of the Australian community.

“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 ATO has agreed with the principles outlined in the new guide.

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Funny how we can sympathise with welfare cheats but when a landlord takes advantage of a legal tax incentive such as negative gearing everyone is outraged. Yep no chance of AI ever disrupting the economy and driving productivity growth in this country because we are the “regulation leaders of AI”! A whole industry build on creating unnecessary red tape!

As per devils_advocate comment, this is absolutely a false equivalence with Robodebt (based on the current details we have). The understanding at the moment is that these are genuine debts – not falsely and illegally calculated figures that were used in Robodebt. The comparison diminishes how terrible Robodebt was.

I don’t understand, why the general public seems to get upset by the ATO chasing outstanding debts. I agree that it needs to be done considerately, but why should most of us pay our debts in full and others be given a free hit of a reduced amount?

Why – Capital Retro – should someone who is late to pay, be given a 50% discount? If that is the policy, then why wouldn’t everyone delay paying?

FYI – I have some exposure to the ATO and find that it is already actually quite generous with its removal of penalties.

Capital Retro2:24 pm 08 Apr 24

Karen 10, I said the 50% discount would only apply for people who are assessed not to be able to pay the debt (in full).

You may not be aware that the phone and credit card companies sell their debts for about 10% of face value to large debt collection companies who immediately make the 50% offer to the debtors. Most are young and trying to get a loan to buy their first house. They can’t because they have been listed with the credit rating agencies so that’s when the families and friends get active.

Do the math.

Capital Retro12:14 pm 08 Apr 24

ATO doesn’t have a clue about collecting debts. First they should have an amnesty period offering to impose no penalties an no fines for those who come forward and admit they the ATO money and make an arrangement to pay it back.

With others, they should assess their ability to pay and in some cases, waive half the debt if the other half is paid. People will often go to relatives to help them out when offers like this are on the table.

I assume the ATO has all these debts listed with the credit rating agencies?

devils_advocate11:17 am 08 Apr 24

Probably a false equivalence in this instance.

Robodebt involved social security and welfare “overpayments” which had been determined using an illegal methodology, namely income averaging

This tax issue appears to be predicated on tax debts which are legitimate debts ( based on information to hand so far)

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