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Reactivating old debts: new guidelines for government agencies


In response to the ATO’s recent actions on reactivating or offsetting old tax debts, the Commonwealth Ombudsman/ACT Ombudsman and the Inspector-General of Taxation and Taxation Ombudsman (IGTO) have jointly issued new guidelines aimed at improving how Australians are notified about debts they owe to the government. The guidelines report outlines principles designed to ensure that the process of debt notification is handled with transparency, clarity and sensitivity towards the people and businesses affected.

Mr Iain Anderson, serving as both Commonwealth Ombudsman and ACT Ombudsman, together with Ms Karen Payne, the IGTO, has emphasised the importance of government agencies adopting a compassionate and principled approach when dealing with debt notification. “While the law may require agencies to take certain actions, it is crucial that these actions are taken in a manner that minimises distress”, they have said.

The guidelines propose five key principles for the ATO and other government departments to consider when conducting programs:

  1. Transparency and accountability – agencies should communicate clearly why the debt has arisen, to foster trust and confidence in the process.
  2. Clarity on the debt’s origin – individuals and businesses should be given the information they need to understand the source and nature of the debt, and this information should be tailored to their circumstances.
  3. Clear pathways for review – information on how to request a review of the debt, apply for waivers and arrange repayments should be readily accessible, helping people to understand their rights and options.
  4. Accessible support – contacts for further assistance must be provided, acknowledging that people may have additional questions or need personalised support.
  5. Commitment to improvement – the process of debt recovery should be viewed as an opportunity to learn and enhance future practices, based on oversight recommendations and past experiences.

Anderson and Payne noted the significance of reflecting on past interactions and the recommendations from oversight bodies to continually elevate how agencies engage with the community regarding sensitive matters such as debt recovery. 

The ATO has welcomed the report, saying it is reviewing its approach and is committed to applying the five key principles in future when dealing with and communicating about old tax debts.

Taxpayers who have an unresolved complaint or dispute with the ATO can lodge a dispute with the IGTO to receive independent assurance. The IGTO will conduct an independent investigation of the actions and decisions that are subject to dispute, and can help taxpayers better understand the actions taken by the ATO and/or independently verify whether shortcomings exist in the ATO’s actions or decisions which should be rectified, as well as identifying other options taxpayers may have to resolve their concerns. 

For example, in one case study, the IGTO assisted a taxpayer to verify whether the full amount of general interest charge (GIC) had been remitted on their tax debts. In another, after a taxpayer’s original request for the ATO to exercise the discretion to advance the taxpayer’s refund instead of offsetting it against their tax debt was denied, despite the person’s imminent risk of homelessness, the taxpayer lodged a dispute with the IGTO. Following urgent discussions between the IGTO and senior ATO officers, the ATO reversed its decision and the taxpayer received their refund. 

The IGTO can also intervene in cases where the ATO has used family assistance payments to offset tax debts. According to another of the IGTO’s case studies, the ATO used a Centrelink Family Assistance (CFA) payment to offset a tax debt that a taxpayer had. At the time, the taxpayer was unemployed and supported two minors along with an ageing parent, and therefore relied on the CFA payment. After IGTO intervention, the ATO agreed to refund the offset, recognising it was not appropriate to pursue debt collection given the particular circumstances. 

Taxpayers interested in lodging a dispute with the IGTO should note that they must have first attempted to resolve the complaint directly with the ATO, unless special circumstances exist. Those that remain unsatisfied with the ATO response should then lodge a formal complaint with the ATO for review. If taxpayers are still unsatisfied with the outcome of the ATO review, they can then lodge a dispute with the IGTO for an independent investigation, either online or via post or phone.

Source: Inspector-General of Taxation - how to tell people they owe the Government money - Best practice prinicples for notifyng people about debts