Owing the ATO just got way more expensive

By Simon Lewis

19 May 2025

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Owing the ATO just got way more expensive

In the wake of the COVID-19 era, the Australian Taxation Office (ATO) adopted a lenient stance toward small businesses with GST, PAYG tax, and income tax obligations. However, this period of leniency has come to a screaming halt and the ATO is now aggressively pursuing small businesses that owe tax debt, implementing stringent debt collection measures and shutting down businesses unable to comply.

The current situation

Rob Heferen, the Commissioner of the ATO, recently highlighted the severity of the issue. Small businesses collectively owe the ATO about $24 billion relating to their business activity statements (BAS). Heferen expressed concern over the growing trend of businesses falling behind on these payments, saying: “We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable.”

The numbers are alarming. Small businesses account for 65 per cent of all collectable debt owed to the ATO, which amounts to $34 billion. Over the past four years, the total collectable debt, from businesses and individuals, has surged from $26.5 billion in June 2019 to $54 billion in late 2024 – it has more than doubled! This sharp rise highlights the escalating pressures on small businesses across the country.

Aggressive debt collection

In response to the mounting debt, the ATO has intensified its debt collection efforts. Businesses with unpaid tax debts face the risk of being shut down if they fail to settle their obligations. The ATO’s hardline approach is a stark contrast to the leniency shown during the pandemic and it serves as a brutal wake-up call for small-business owners.

While the ATO is offering payment plans to help businesses manage their tax debts, these plans aren’t a get-out-of-jail card and currently carry a general interest charge of 11.17 per cent. Not only are you paying a high interest rate, but these loans also have short repayment terms, so your monthly payments can be astronomical. For many, meeting these repayment conditions may prove to be an insurmountable challenge, potentially crippling their operations.

From 1 July 2025, interest paid to the ATO will no longer be tax-deductible. If there was ever a benefit to owing the ATO money, it is now non-existent.

What can businesses do?

We reached out to Antony Resnick, insolvency expert and partner at DVT Group, to get his thoughts on what businesses can do if they are burdened by ATO debt. He cautioned not to drown in the sea of debt but to raise your hand and ask for help. Companies that lodge their BAS but do not have the money to pay their bill are far better off from a personal liability standpoint than those who don’t lodge and don’t pay.

One option for businesses is to refinance the ATO debt through private lenders.

Simon Lewis is the sales and growth marketing manager at TrailBlazer Finance