More than a year on from its inception, the world is still battling with both the health and financial impacts of the pandemic.
This has been evidenced by the lockdown of four major Australian cities in the past month, following a rise in COVID-19 cases. And, the collated data show that the nation is struggling financially with Australian businesses owing the ATO more than ever.
Australia is fortunate enough to receive extensive fiscal support from the government while the pandemic rages on. This strategy was reflected in the ATO’s collection practices which gave many businesses and individuals tax breaks.
However, the ATO’s generosity has been reflected in national budget figures. To draw a comparison, in 2015 the budget recorded about $20 billion dollars in uncollected taxes. Now, figures reflect that 2020 recorded $36 billion in uncollected taxes – that’s approximately a 75% increase.
If figures continue to rise at the current rate, it’s projected that there will be $46 billion in outstanding taxes by 2025. This may well put extensive pressure on the Australian budget and, as a result, the economy.
There’s little indication that the COVID-19 pandemic is slowing down – especially in Australia, where infection rates are hitting daily highs each day. Fortunately, the ATO is taking this into consideration and will continue to be flexible with their terms.
Currently, the ATO is set to continue agreeing to set up payment plans with businesses if they can’t meet their full tax obligations. However, in a sign that things may change, the ATO has recently removed a section from their website where they detailed ongoing viability surrounding tax repayments.
With vaccinations rolling out across the world and Australia announcing a plan to have residents vaccinated within the next twelve months, it’s hopeful that the economy will recover soon.
While the ATO is being flexible with struggling businesses and shown considerable leniency with those who can’t make tax payments, the legal requirements remain that all businesses must report their tax obligations.
If a tax debt is reported and a business is unable to make the payment, as of now it is likely that the ATO will work with the organisation to set up a payment plan that is feasible.
However, if a business is unable to pay tax and neglects to report this to the ATO, they may deal with dire consequences.