The ATO is issuing garnishee notices while tax disputes are still before the Administrative Appeals Tribunal, says a new report.
The report on early debt recovery action by the Australian Taxation Office (ATO) comes from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
‘Severe’ impact
In response, Ombudsman Kate Carnell has called for change. She wants the ATO immediately to cease debt-recovery action against any small business with a dispute before the AAT.
“We found ATO debt-recovery action occurred in at least 12 per cent of cases before the AAT,” Ms Carnell said. “This severely impacts a small business’s resources to prosecute its case and carry on its business.
“Strong forms of debt recovery action by the ATO, such as garnishee notices, can destroy a small business. This is because it effectively strips funds from a small business’s bank account.
“Consequently, the small business is not able to pay wages, rent, suppliers or bank loans. The follow-on effects of this – bad reputation, no credibility and potential bankruptcy – are significant.”
Lack of oversight
Ms Carnell also bemoaned the ATO’s authority to produce garnishee notices without what she says is any external oversight.
“ATO garnishee notices must be actioned only with appropriate oversight and approval, such as the court system, before an order can be issued,” she said.
“The asymmetry in power between this large and powerful organisation and the small business sector has left these particular small businesses in a vulnerable position and with diminished access to justice. They simply don’t have the same resources to fight where there is a legitimate dispute.
“Small businesses taxpayers in dispute with the ATO now have the option of a simple, fast and cheaper external review through our new Small Business Concierge Service.
“Our case managers help them understand the AAT process. They get an hour with a small business tax lawyer at a cost of $100. They also get an additional hour free if they decide to go ahead with the appeal.”