If you can’t pay your tax debts, the ATO can use various recovery tools.

It may come as a surprise that one of these recovery tools is referring a tax debt to an external debt collector. The ATO can do this for tax debts up to $250,000.

Disputed debts

The only condition on the above is that the ATO will not refer a debt that is being formally disputed. Additionally, if a dispute is subsequently raised the debt will be “returned” to the ATO for action.

How the ATO works with debt collection agencies

The ATO’s policy statements provide the following information regarding the engagement of debt collectors to recover tax debts:

• “we don’t ‘sell’ the debt – it always remains payable to us
• they aren’t paid commissions – they are paid on a fee-for-service basis
• we make sure they provide a professional service and their negotiations with you should be of the highest quality
• we require their staff to apply the same guidelines as our staff in making their decisions about payment of your debt or remission of interest.”

What can you do if a debt collector contacts you about your tax debt?

Even if the ATO engages a debt collector to collect tax debts from you, you can still:

• Negotiate a payment arrangement with the ATO via the debt collector; and
• As part of the payment arrangement have interest and penalties reduced.

However, if you are contacted by a debt collector, on behalf of the ATO, you should obtain professional advice about your options and the risks you face. Some of the options available are on our TAX DEBT SOLVED website and our professional staff can discuss them further with you.

If you don’t obtain professional advice, you run the risk of things getting worse or the ATO taking further recovery action.

What happens if a debt collector is unsuccessful in recovering a tax debt?

If the debt collector engaged by the ATO is unsuccessful in recovering a tax debt, the debt will be returned to the ATO for further recovery action which will likely include:

• Issuing Garnishee Notices to your bank or other such parties;
• Issuing a Garnishee Notice to your employer if you are a wage earner;
• Issuing Director Penalty Notices; or
• Commencing liquidation or bankruptcy proceedings.

Contact us for assistance

If you or your business are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help with a free, no-obligation consultation, contact us here.