Taxpayers with aged debts that the ATO had paused collecting or put on hold should be aware that offsetting aged debts against tax refunds or credits has now resumed. The aged debts can be offset either from ATO accounts or credits from other government agencies, although a debt will not be offset if the only available credit relates to a Family Tax Benefit amount.
“Aged debts” is a collective term the ATO uses to refer to uneconomical non-pursued tax debts that it has placed on hold and has not undertaken any recent action to collect. These debts do not typically show up on the online accounts of the taxpayers as an outstanding balance as the ATO has made them “inactive”.
Usually when a debt is put on hold, the ATO notifies the taxpayer via a letter that the debt collection has been paused, although any credits that the taxpayer is entitled to will be offset against the debt. In addition, the ATO will note that it reserves the right to re-raise the debt in the future, depending on the circumstances of the taxpayer. Letters were sent out in May 2022 to remind taxpayers that they have aged debts and June 2022 will see the recommencement of debt collection.
While most taxpayers (or their tax agents) should have received their aged debts letter by now, some may not have received anything, due to a change of address or patchiness in the postal service. The first clue for those taxpayers that they may have an aged debt may be when they notice that their refund is less than expected or that a credit on one account is less than it should be. To avoid surprises, taxpayers who are unsure whether they have aged debt can check their online services for a transaction with the description “non-pursuit” on their statement of account.
It's important to remember that those with multiple accounts need to check all relevant accounts for that description to ensure they do not have an aged debt.
Taxpayers with aged debts who are unable to or choose not to pay all or part of the debt may find that they end up paying more, as general interest charge (GIC) may be automatically applied even where the debt is “on hold”. Where the ATO offsets aged debts either from ATO accounts or credits from other government agencies, taxpayers will be notified that the debt has been re-raised and offset. If it is offset against an ATO account, taxpayers will be able to find a transaction on online services with the description “offset”.
By law, the ATO is required to offset credits against any tax debts owed – except in some very limited circumstances, such where the taxpayer already has a fully compliant payment plan for outstanding debts; where the tax debt is a future debt or is related to a director penalty liability; where a deferral has been granted for recovery action; or where the available credit is a Family Tax Benefit amount.
Taxpayers that do not meet these criteria and are unable to pay their aged debt may be able to apply for a review or a debt waiver depending on their circumstances. For example, a permanent release of a debt may be available to on the basis of serious hardship (ie where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education).
Source: www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Resuming-offsetting-of-debts-on-hold/
www.ato.gov.au/General/Paying-the-ATO/How-much-you-owe/Debts-on-hold/