ATO’s debt book grows to more than $53 billion as boss Chris Jordan faces Senate Estimates
Debt owed by Australians to the Australian Taxation Office (ATO) has hit another record amidst the COVID-19 pandemic.
The agency will face renewed pressure to recoup revenue when tax commissioner Chris Jordan fronts Senate Estimates on Tuesday morning, with figures showing the ATO’s total debt book has grown to more than $53 billion.
The figure, contained in the ATO’s annual report for 2019-20, includes debt owed across all taxpayer categories including collectable debt, insolvency debt and debt subject to objection or appeal.
Collectable debt — that is debt owed by individuals, businesses and super funds to the ATO — has now reached a record $34.1 billion from $26.6 billion it reported the year before.
The majority of “collectable debt” is owed by small business — $21.4 billion for small business, up from $16.5 billion the year before.
|Debt subject to objection or appeal||$11.3b||$10.4b|
|Uneconomical to pursue $1.4b||$1.4b||$700m|
|Irrecoverable at law||$2.8b||$900m|
(*Revised figure from ATO provided to ABC News).
Chris Jordan paid $929,027 total remuneration
The ATO employs more than 21,000 staff and has an operating budget of about $3.6 billion.
Its boss, Chris Jordan — who was appointed in January 2013 and whose term runs until February 2024 — was paid $929,027 in total remuneration for the year.
The ATO said all its compliance activities for the year resulted in a total revenue gain of $13.7 billion, against a target of $15 billion.
The agency said it did not meet the target as it had to change its compliance approach to assist taxpayers impacted by natural disasters and the COVID-19 pandemic.
This included the agency agreeing to put a hold on payments it expected to receive from impacted clients (including debt payments) and pausing “firmer action work, except for high-risk clients”.
Amid the pandemic, the number of working holidaymaker tax returns processed dramatically dipped from 96,298 in 2018-19 to 1,876 in 2019-20.
Their average taxable income fell from $23,075 to $17,262 and their average income tax assessed as payable dropped from $3,920 to $2,650.
Tax refunds rise while tax collections fall
Each year, 14 million Australians lodge tax returns resulting in more than 10.8 million refunds.
In 2019–20, the ATO issued income tax refunds with a total value of $55.3 billion and also issued activity statement refunds with a total value of $76.9 billion.
This meant total tax refunds were $132.3 billion, up 23.4 per cent from 2018–19.
The COVID-19 pandemic resulted in net tax collections in 2019–20 dipping by $21.2 billion (about 5 per cent) to $404.7 billion.
The figure was $33.9 billion (7.7 per cent) below the amount expected at the time of the budget 2019–20.
Fight against multinationals, black economy
The ATO’s main group hunting large corporates and multinationals, the Tax Avoidance Taskforce, raised $2.7 billion in tax liabilities and almost $1.6 billion in cash collections.
The ATO also has a number of other taskforces focusing on criminal and black economy activity, which in total raised more than $800 million in cash collections.
But the ATO had in some cases opted to settle with some large companies that disputed tax bills, rather than fight it out in court.
In the public group and multinational business line, the ATO settled with 112 companies. It originally hit these companies with almost $3 billion worth of tax bills, but after settlement negotiations, ended up collecting almost $2 billion.
The ATO often points out that retired federal court judges review its settlements with large businesses.
This measure was introduced to provide greater independence in its settlement process and to counter the perception the agency may be giving big business an advantage over smaller taxpayers who cannot afford expert legal advice.
|Client group||Settlements (number)||ATO original tax bill||Settled amount|
|Private and wealthy||134||$204.1m||$101.4m|
|Public and multinationals||112||$2.93b||$1.86b|
|Self-managed super funds||55||$2.9m||$2.3m|
|APRA-regulated super funds||5||$1.2m||$1.2m|
Taxpayer objections and complaints
There were 38.9 million returns lodged in 2019-20, and 467,884 adjustments arising from audits.
The ATO can offer what’s known as “private binding rulings” when taxpayers object to their decisions.
Of 22,290 objection cases resolved in 2019-20, it said it had made private binding rulings for just 4,126 of them.
There were 455 applications for review or appeal to the Administrative Appeals Tribunal (AAT) or other courts in 2019–20, with 153 decisions made either in relation to these applications or applications made in earlier years.
The ATO also receives complaints from taxpayers about various issues ranging from questions about reporting obligations to more serious issues such as the handling of audits and reviews.
The agency received 24,778 complaints in 2019-20 (inclusive of 1,382 complaints made to the tax ombudsman, the inspector-general of taxation Karen Payne), the majority of which related to income tax.
Public interest disclosures, fraud investigations
The Commonwealth Ombudsman also provides oversight in the ATO’s management of allegations and complaints made under the Public Interest Disclosure Act 2013.
During 2019–20 there were 15 disclosures made directly to the ATO.
Three additional disclosures were referred to the ATO from the ombudsman and one disclosure was referred by the ATO to the Australian Federal Police for investigation.
In 2019-20, the ATO also conducted its own internal fraud investigations.
It assessed 401 allegations or reports, of which 144 were substantiated, 212 were unsubstantiated, 14 were not able to be determined and 31 were ongoing.
Unauthorised access continued to be the largest category of substantiated allegations, and predominantly involved an employee accessing their own records, those of their family members or other people known to them.
During 2019–20, there were 27 occasions on which information was disclosed to ministers: two occasions to Treasurer Josh Frydenberg, 24 occasions to the Minister for Housing and Assistant Treasurer Michael Sukkar, and one occasion to the Assistant Minister for Superannuation Jane Hume.
Compensation claims, legal fees and consultant spend
Under the Commonwealth’s Scheme for Compensation for Detriment caused by Defective Administration, compensation may be paid to an individual, company or other organisation that has experienced detriment as a result of the ATO’s defective actions or inaction.
ATO payments under the scheme are discretionary, and last year Senate Estimates was told anyone receiving compensation was typically asked to sign an agreement that they would not discuss the case thereafter.
In 2019–20, the ATO registered 143 compensation cases and finalised 146, with 72 resulting in compensation being offered.
The total amount of compensation payments made in 2019–20 was $630,573.
The median compensation payment was $661, and the average was $7,507.
The ATO’s total legal expenditure for 2019–20 decreased by $3.15 million (or 3 per cent) when compared to the previous year.
Its total external and internal legal expenditure was $91,851,118. Its total legal costs recovered was $10,606,804.
The ATO also uses consultancy services to obtain independent advice.
During 2019–20, the ATO entered into 126 new consultancy contracts, resulting in total actual expenditure of $5.6 million.
In addition, 82 ongoing consultancy contracts were active during 2019–20, resulting in total actual expenditure of almost $5.7 million.