Urgent tax warning as Aussies hit with ATO bills: ‘Hunting down debts’

Aussies with tax debts are being warned not to ignore them or they could face serious consequences from the Australian Taxation Office (ATO). The tax office is cracking down on overdue debts after showing taxpayers leniency during the pandemic.

Hive Wise founder Hripsime Demirdjian told Yahoo Finance she was seeing the ATO chasing tax debts "more frequently". The accountant and registered tax agent said "all debts" were in the tax office's sights, including ones of a few thousand dollars.

“Now that the COVID period is well and truly behind us, they’ve started to ramp up their debt collection and [are] kind of hunting down and chasing down debts that are overdue,” she said.

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If you lodge your own tax return by the due date of October 31 and get a tax bill, your payment to the ATO is due by November 21.

The tax bill deadline will be different if you use a tax agent to lodge your return or if you lodged after the tax deadline of October 31.

If you miss the due date, the ATO will charge interest on your unpaid bill and this amount will grow each day your debt remains unpaid. Interest is currently charged at a rate of 11.36 per cent annually, or 0.031 per cent per day.

Do you have a tax story to share? Contact tamika.seeto@yahooinc.com

“There is a daily interest rate and that is basically for every day it is late,” Demirdjian said.

“At the moment interest that the ATO is tax deductible however, from July 1, 2025 that is going to change and it won’t be tax deductible which is not very tax beneficial for individuals and businesses out there.”

The change, which is not yet law, has been made to encourage tax debt to be paid on time, Demirdjian said.

The ATO is trying to claw back $50 billion in debt, an amount that has skyrocketed over the last four years.

What if I can’t pay off my tax debt?

If you can’t pay off your tax bill upfront, you can request a payment plan with the ATO. This allows you to break down your bill into smaller amounts repaid weekly, fortnightly or monthly.

Demirdjian said this shows the ATO you are willing to pay off your debt but you need more time and flexibility. However, you will still be charged interest.

“An individual can do that themselves or you can get a tax agent to do that for you,” she said.

“The payment plan that you negotiate depends on your circumstances and what the ATO is willing to provide you as a payment plan.”

What can happen if you don’t pay your tax bill?

If you neglect your debt and don’t set up a payment plan, the ATO will start sending you reminder notices that you have an overdue tax debt. This can be done via post, email or SMS.

If you keep putting it off, Demirdjian said the ATO will escalate the matter to a debt collection agency who will start chasing you instead. She said this recently happened to a client who had a $6,000 tax bill.

The ATO can also pursue legal action against you, issue you with a director penalty notice if you are a business owner with overdue obligations like superannuation or PAYG withholdings, or issue you with a garnishee notice.

“A garnishee notice is a very serious thing because it basically gives the ATO authority to request repayment of your debt by those people who hold funds on your behalf, either now or in the future,” Demirdjian said.

“The ATO can go to your bank, tell them that you owe them this amount of debt and the bank will have to release those funds to the ATO as a way to satisfy the debt that you owe to them. These garnishee notices are becoming more and more common.”

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