Professional help may be necessary if the timing or size of a tax debt distorts the cash flow of an enterprise or an individual such that there are difficulties in making payment when it is due.
Whether or not payment circumstances are in the control of the taxpayer should have a significant bearing on the actions of the Tax Office, in seeking to enforce a debt.
But although the Tax Office has well-established and documented procedures for their debt collection processes, there are two problems which arise in practice:
- Individual tax officers may be unaware of the full extent of relief measures which may be available to a taxpayer under their own policies; and
- In some instances discretion is not exercised, or not fully exercised to ensure that the taxpayer is treated fairly in the particular circumstances.
The Tax Office Under Pressure To Collect Debts Doesn’t Always Get It Right
It is the Tax Office’s job to collect tax revenue without undue delay. In practice this requires the daily exercise of judgement by tax officers in achieving a balance between fairness to the taxpayer and protecting the public interest.
In reality the Tax Office is under considerable pressure to collect cash for the government to spend, and it is therefore not surprising that treatment of individual taxpayers can sometimes be less than totally fair. Taxpayers may not be aware of the discretions available to reduce penalties, suspend or even cancel debts in appropriate circumstances.
The Big Stick – Tax Penalties Adding To The Debt
Penalties add to and can easily exceed the amount of the tax debt, which makes it important that proactive action be taken as soon as possible, and wherever possible, before stipulated due dates, when difficulties become apparent. The Tax Office have discretion over the applicability and amount of penalties to be applied in each situation.
Tax penalties generally comprise two components: a culpability factor, and an interest component, which are partly automatic and partly discretionary. Without discretion being exercised correctly, arbitrary penalties and interest can easily exceed the amount of tax involved, sometimes by multiples.
Because of the complex mixture of policy, procedures and the tax law in relation to the collection of tax debts, it is essential than when things go wrong, the parties negotiating with the Tax Office have sufficient skill and experience.
Taxpayers should not assume that the ATO will look after them if they attempt to handle debt negotiations personally, or even that the tax agent who prepared the tax return is experienced enough to do so.
When To Get Specialised Professional Help
A decision to get professional help will of course have to be moderated by the amount of the debt involved. Engaging an expert tax or legal professional involves some expense, and a pragmatic decision is required as to whether a position is worth fighting for, in the light of the expense of doing so.
Nevertheless, the vast majority of difficulties can be resolved fairly quickly and easily, which can be the result of a relatively brief involvement by a highly experienced tax specialist.
This page was last modified on 1 July 2015