For months, we’ve been hearing about “robotax” from the media, the Greens and other crossbenchers: the Australian Tax Office has been automatically raising old tax debts of individuals and small business taxpayers and offsetting them from tax refunds or alerting taxpayers about the need to repay the debt. The Greens and Guardian Australia, which has led the coverage, quickly labelled it “robotax” (initially in quotes, now without) in an effort to link it with the infamy of robodebt.
It’s nonsense: there is no “robotax”. The comparisons to robodebt are offensive, and the ATO is not merely doing its job but doing what the law requires it to do. It’s a case study of how the media and politicians can distort and misrepresent policy in a way that damages the interests of the community.
The issue arose a couple of years ago when the auditor-general found that the ATO had changed the way it handled old tax debts:
Prior to January 2020, the ATO’s automated system managed the offset of credits owing to taxpayers against debts considered to be uneconomical to pursue (‘non-pursued debts’). The system process was referred to as a ‘re-raise’. If a taxpayer became entitled to a credit the nonpursued debt would be re-raised on the system and the credit offset against it. The ATO also has established, through policies and pre-determined system-based rules, exclusionary criteria to prevent certain non-pursued debts from being re-raised.
In short, if you owed the ATO a small debt, they didn’t waste more taxpayer money than it was worth to try and collect it. It was put on hold, but if you ended up being owed money down the track, the ATO took it out of your refund. Simple, practical, efficient. The system ensured that if you owed money, you didn’t get a handout from the government in the form of a full refund.
But the ATO had paused its re-raising process in 2020. The Australian National Audit Office (ANAO)’s problem with that was that it was unlawful: the ATO can’t just waive debts. The auditor-general suggested to the ATO that it “ensure full law conformance with the legal requirements of the Taxation Administration Act 1953“.
This was only a minor recommendation by the ANAO but important nonetheless. It was the Auditor-General telling the ATO that it needed to resume its method of collecting debts that were too small to pursue by docking them from refunds, or decide that it was going to waive them — in which case it needed to apply to the finance minister, as the law required. The ATO — which, as Guardian Australia had to admit, separately obtained legal advice telling it that it had to pursue the debts — resumed its re-raising process and began contacting people who owed money.
There is no comparison with robodebt, which was about a deeply flawed and unlawful method of estimating overpaid welfare payments, dreamt up by bureaucrats and ministers who engaged in misleading conduct, and hounding people to pay up, in the end leading to suicides and deep misery on the part of many of the victims of fake debts. In this case, these are verified, existing, unpaid tax debts that will be taken from tax refunds. The comparison isn’t just wrong; it’s offensive to the tens of thousands of victims of robodebt.
That hasn’t stopped the Greens — who have repeatedly suggested, without evidence, that the ATO is pursuing “questionable debts” that people “may not even owe” — and Guardian Australia chanting “robotax” non-stop, with other media outlets such as the ABC picking up on the robodebt comparison. Outlets rushed to find the worst possible cases of people not being aware of debts, confusing people’s poor understanding of their financial situation with the ATO’s attempt to recover debts.
Eventually the ATO succumbed to pressure about its recovery program: in November it stopped contacting people about the debts, and then in February it paused the program altogether in relation to debts more than seven years old while it conducted a review. But the fact remains that it has no discretion to waive debts.
What the Greens and the media have been pressuring the ATO to do is to act unlawfully, and allow some small businesses and individuals to not pay the full amount of their taxes — while the rest of us have to pay full freight. Since when do the Greens and the media champion people who avoid paying their tax? They seem to be espousing a policy whereby if you simply refuse to pay the ATO long enough, you’ll have your tax debt waived, because you’re a retiree, or you “didn’t know”, or you thought it had been waived (or you’re a small business, and we must all worship at the altar of small business).
A strange position indeed for politicians and media outlets that advocate equity and lots of government spending.
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Pretty sure the problem here is that the ATO is surfacing debts without any notice from well outside the time period people are required to keep their tax records.
It’s one thing if the ATO has been sending you a letter every quarter or year telling you that you owe them money.
It’s another thing entirely if you get told for the first time you owe them money from a part-time job you had 15 years ago.
The reasonable thing to do is pick a date (let’s say the end of this coming FY), tell the ATO to get all its notifications out for people whose debt was incurred within the 7 (?) year period that people are required to keep records, or who have been regularly informed that they have an outstanding debt, let the rest go and fix the system that allowed this to happen in the first place.
If that requires some legislation to be written, so be it.
I think that’s exactly what the ANAO did, bring to the ATO’s attention that they were, (already) by law, required to collect the debts that were in effect being “waived” because it was deemed as uneconomically viable to pursue them. As Newton newse above pointed out it’s a legal dilemma for the ATO as they were in effect apparently being very kind to people with tax debts.
What I don’t understand is how people supposedly didn’t know they had a tax debt as we all receive a tax statement either by way of debt notice or a refund has been paid once a tax return is lodged.
Legal dilemmas can be resolved by changing the relevant law(s).
Well I don’t know any more than is in the articles linked above, but these are the kinds of examples there if you didn’t read them:
If I had to take a guess, I’d say that at some point a decision has been made about a debt whether or not to actively pursue it or effectively write it off, and if the conclusion is write it off, then it stops being communicated to the person who owes it.
So if the ATO suddenly resurfaces a debt that it hasn’t told you about for a decade – long after you’ve forgotten it and (quite legally and reasonably) disposed of any records that might be able to prove whether or not it’s genuine – then it’s a bit rough having to just pay up under the assumption that the ATO is always right (this is where some of the comparison to Robodebt lies).
Isn’t the problem also that the ATO charges a very interest on debts, dated from the time they claimed they were due?
I think the ATO has discretion about whether or not to charge interest. Though I suspect that discretion is often used in a “just come along quietly and nobody has to be charged interest” kind of way.
But, yes, that would also be relevant if you’re charged interest on a debt you didn’t know about.
The ATO can waive interest on debts, but rarely does so, unless yo owe them squillions. They treat those debtors very differently to the hoi polloi. They do however let you claim the interest as a tax deduction. They also pay you interest in the eventuality that they discover they owe you money. It comes along with a letter telling you to declare this interest as income on your next tax return or else. I have one of those letters somewhere in my records.
And that the burden of proof in tax matters is the reverse to most other laws the average punter is aware of…
Which is actually contrary to the law and the courts have pointed this out to the ATO time and time again. But they continue to do it.
Or just stop worrying so much about collecting taxes?
If all taxes are for us destroying money or influencing behaviour then:
a) focus on taxing the wealthy who have the most money to destroy; and
b) don’t worry about taxes from years ago which have no bearing on inflation (or behaviour!)..
And if only the ATO and ASIC worked with due diligence on the tax liabilities of big business, instead of wrist-slapping and fining paltry amounts for transgressions.
A real harrumphing from Keane today! However, Bernard dear Bernard, is the ATO really going after the bastards who truly are beyond the pale and rort the system because they can afford to? Or is the ATO doing exactly what so-called Services Australia did with robodebt- pursue and harass those who can’t fight back?
Agree, quite Orwellian how or MSM can claim victimhood for middle class or wealthy but have no issue when lower income etc. are thrown under a bus, reinforcing old class attitudes and imported ‘Kochonomics’ or ‘segregation economics’ for <1%; more about denigrating taxes obsession of the latter (as are smaller budgets, govt., lower taxes and fewer sensible regulations.
Certainly everyone should pay the tax they owe and there is no case for randomly letting some people off. But it’s not good enough for the ATO to simply present a demand for money, or take money, with no explanation; particularly when the tax demanded is supposed to relate to matters outside the time limit for keeping records.
Unless of course we accept a priori the ATO is perfect, never makes mistakes and is always fully justified in every case.
I am not sure what “simply presenting a demand for money” might mean. If it genuinely is the first that the taxpayer or their accountant has ever heard of it, the description might fit. If the taxpayer was ever aware of an actual or potential debt, and the debt has merely resurfaced like a dead budgie that won’t flush away, it’s no longer “simple”.
I doubt it was “random”, most creditors write-off some debt that they view as uneconomical to recover. They certainly don’t wait 10 years and then change their minds -well they couldn’t even if they wanted to due to statute of limitations.
But as the article says, the ATO is not subject to a statute of limitations on debts owed to it, quite the opposite, and neither is it permitted to disregard debts even if they are uneconomical to recover — it is obliged to pursue them all. drsmithy’s comment makes sense: the system should be changed, by legislation if necessary, so within the time period when records are available the ATO has to inform each debtor of what is owed, and why, and then each year keep the debtor informed of the amount outstanding and interest payable until the debt is recovered. The uneconomic issue with small debts could perhaps be sorted out by telling the debtor to pay up the relevant amount within the first year or else it will be increased automatically to an amount that is worth recovering. That should be sufficient incentive.
If the ATO cannot manage to inform tax payers of their debts in a timely and appropriate way with adequate information, perhaps the senior personnel who fail to do their job at the ATO should be made personally liable for the relevant debt(s) in place of the tax payers. That would be fun.
I wondered that! Where the accountability? If I let a debt slide for that long in the numerous businesses I’ve run, I think I’d rightly be in a spot of bother. Claims that its hard and complex is precisely why we so generously renumerate the ATO senior management.
The “beatup” here is BK’s article.
Justice delayed is justice denied and one of the issues with Robotax [no apology for using the term] is that many of those who might be hit with this tax are unaware that they have a tax debt and have long ago thrown away any records that might pertain to the debt. Hence the battle between the ATO and those people whose “debts” they’ve suddenly resurrected will be every bit as one sided as was the Robodebt effort.
The debt recovery program was paused for good reason and if it takes the government to step in here to prevent ROBOTAX then they should. BK can attempt to whip up support from “the rest of us” but if the ATO failed to get its act together more than seven years ago, it’s left it too late.
Perhaps the ATO could put more effort into corporate tax fraud. They’d recover way more money there than from this dismal effort.
BK can’t resist any opportunity to stick it to the Greens.
Yes, I think that’s more like the underlying motivation for this article.
Nonsense, Crikey has uncritically repeated these claims over several months by the Guardian and the Greens – acting more as a newswire service on behalf of the Greens than undertaking critical analysis.
Businesses should pay their fair share in tax, big or small, and the ATO should act within the law as is required (kind of the point of this article).
The problem with Bernard’s article is the assumption that the ATO are failing to pursue those who owe millions through this scheme. This is nickel and dime stuff. $5k here, $29k there. If you owe millions the ATO have known this all along (as has the taxpayer).
But all you have to do is send your lawyers and accountants along to the ATO and negotiate an “arrangement”. And all of a sudden your tax bill is 66%, 50%, even 25% of what it actually was.
One rule for the rich, another for the rest of us.
A long while ago the ATO demanded several thousand dollars from me over an insurance payout. A personal thing, not business. When I wrote to appeal it, they knocked off about 50%. I still don’t know whether they were within their rights to tax me, but I paid up. I had the strong impression at the time that the tax officer who handled my case was on performance bonuses.
Maybe I’ll get a letter asking for the amount they discounted? Not huge, but the interest would kill me (20+yrs). As a ten pound pom I might even be deported. Seriously.