Small Businesses: The Administrative Appeals Tribunal (AAT) Has New Debt Review Powers
If a small business is facing debt recovery actions commenced by the Australian Taxation Office (ATO), the Administrative Appeals Tribunal (AAT) may now be able to pause or modify these actions. Your business is considered a small business for tax purposes if it maintains an annual turnover of less than $10 million. Currently, small business can only seek to pause ATO debt recovery actions through a lengthy and costly court process. This is inaccessible for many small businesses. Now, small businesses will be able to utilise the AAT, a more efficient option for ATO debt review.
Removal of Temporary Protections for Small Businesses
Your small business may have accessed some temporary safeguards put in place during COVID-19, such as insolvent trading protections, small business restructuring, and simplified liquidation measures. These are now ending, leaving many small businesses scrambling to re-gain their pre-pandemic stability. However, this will also coincide with a number of new debt recovery actions commenced by the ATO.
New AAT Debt Review Process for Small Businesses
The AAT can now serve as an independent party to tax disputes between your small business and the ATO. When a small business accesses review with the AAT, any debt recovery actions taken by the ATO will be paused or modified. This means that small businesses will not be subject to recovery actions taken by the ATO, including garnishee orders, penalties, and interest charges until the dispute is resolved by the AAT. This change was initially recommended by the Australian Small Business and Family Enterprise Ombudsman back in 2019. The AAT review process for small businesses will not be available until the legislative amendment receives royal assent, and will only apply to proceedings commenced on or after that date. While a date has not yet been set, it is expected to be sometime in the 2021-2022 financial year.
New ATO Debt Review Process for Small Businesses
The ATO has also announced that it will independently review a number of debt disputes for small businesses through an independent arm of the ATO. This will include disputes regarding income tax, Goods and Services Tax (GST), excise, and fuel tax credits. The ATO will not be able to review superannuation or fringe benefits tax. It will, however, be able to review more niche areas of dispute, such as luxury car tax and wine equalisation tax. This process has been trialled at the ATO with positive feedback from small businesses who accessed the trial. This may reduce the need for small businesses to access the AAT process.
The new processes for small businesses facing tax debt disputes are sure to provide meaningful assistance in seeking review. If you would like to learn what this means for your business or you would like to speak with an experienced tax and insolvency lawyer, call us at (02) 4929 7002, email us or complete an enquiry form.