Government ‘unfairly’ refusing to repay outstanding debts paid to ATO

The Greens say the government “duped” the 7,000 taxpayers who complied with the taxman’s controversial campaign.

About 7,000 taxpayers have complied with the taxman’s controversial debt collection campaign, but none will be refunded under the government’s proposed reforms, officials say.

The reforms, announced in the federal budget following backlash against the ATO, would give the commissioner discretion not to use a taxpayer’s refund to offset old debts placed on hold before 2017.

But at a hearing Tuesday of the Senate Economic Legislation Committee, the government said extending that discretion to reimburse taxpayers who have already paid off their outstanding debts “was not going to be possible.”

“Individuals make choices about paying or not paying their debts,” said Finance Minister Katy Gallagher.

She said it would be “extremely unusual” to repay debts paid to the taxman.

“Debts exist throughout the tax system and they are significant. It’s a fundamentally important part of our tax system that if you have a tax debt, you pay it off.

It comes despite the ATO admitting its suspended campaign was “confusing” and revealing around 7,000 taxpayers paid $1 million in response to the letters.

“Our communication on historic debts placed on hold was confusing and we apologize for this,” ATO Commissioner Rob Heferen said.

“The community can rightly expect us to communicate and act with sensitivity, compassion and good judgment. »

“Back then, people thought they were doing the right thing. There were communication problems, we went back, we kept the situation as it was, we implemented the status quo.

Greens senator Nick McKim said the 7,000 Australians “intimidated by a confusing message into paying debt” were being penalized and “misled by the government” compared to those who stood to benefit from the proposed reforms.

“If you are considering legislation that gives the ATO the discretion not to pursue some of these debts, it would be patently unfair of you not to apply that same discretion to people who pay the debt, after having received a confusing communication from the ATO for which they apologized,” he said.

Internal documents obtained by Guardian Australia show the ATO was seeking to raise up to $15 billion by resurrecting old debts previously deemed unprofitable.

The campaign involved sending 200,000 letters to taxpayers and tax agents listing the sums without containing further details of their origin, meaning many would be impossible to verify or take “days of reverse workflow”.

Debts have disproportionately affected financially vulnerable people who don’t have access to tax advice, policy experts say.

While the ATO maintained the practice was required by law, it suspended the campaign in February following backlash from the community, with the government proposing reforms in the May budget.

However, as it currently stands, the discretion not to offset debts will only apply to small businesses, individuals and non-profit entities with short-term debts.