ATO debt recovery action on the rise – understanding the ATO debt collection landscape


The Australian Taxation Office (ATO) is attempting to collect more than $34 billion worth of debts owed by small businesses, and sometimes they are using aggressive enforcement action to collect the money, which is causing significant stress to Australian businesses. In our experience, the ATO has come into 2024 with a completely different attitude towards outstanding taxpayer liabilities.

Experts are predicting that insolvency appointments could return to levels that haven’t been seen since the Global Financial Crisis (GFC).

There are various methods that the ATO employs to enforce payment of debts by businesses. If your business has an outstanding debt with the ATO, it is very important to understand the measures used by the ATO to collect debts, and how to deal with them.

Below we have summarised some of the most serious ATO notices to look out for.

Garnishee Notices

The ATO can issue a garnishee notice to a person or business that holds money for you or may hold money for you in the future. This requires them to pay your money directly to the ATO to reduce your debt.

For individuals, garnishee notices can be issued to:

  • your employer or contractor;
  • banks, financial institutions and building societies where you have accounts;
  • people who owe money to you from the sale of real estate such as purchasers, real estate agents and solicitors.

For businesses, garnishee notices can be issued to:

  • your financial institution;
  • trade debtors;
  • suppliers of merchant card facilities.

Director Penalty Notices (DPN)

Directors can incur penalties equal to their company’s:

  • unpaid PAYG withholding;
  • GST (inclusive of luxury car tax and wine equalisation tax);
  • super guarantee charge.

The ATO may issue a director penalty notice which enables them to start legal proceedings to recover the penalty amount.

It is important to note that there are two different types of DPN:

  1. Standard DPN
  2. Lockdown DPN

The difference between the two, is that a standard DPN is issues to director’s who have lodged the relevant reports on time. Whereas lockdown DPN’s are issued to director’s who have lodged outside the required timeframe.

Under a standard DPN, a director can avoid being held personally liable if they act within 21 days. Whereas directors receiving a lockdown DPN cannot avoid any personal liability and are required to either pay the amount within 21 days, defend themselves using the appropriate procedures, or challenge the DPN.

Statutory Demand

The ATO can issue a statutory demand to a company that has not paid its debts. This requires the company to pay the entire debt or enter into a payment plan with the ATO within 21 days.

If a company doesn’t comply with the statutory demand, a company is assumed to be insolvent and the ATO can apply to the court to have the company wound up.

In summary, if you receive any of these above notices from the ATO, it is essential to act quickly. As failure to do so may result in you as director being held personally liable or commencement of wind-up action, which could result in liquidation.

We would like to reiterate that the ATO have well and truly changed their attitude on collection of debts in 2024. Therefore, it is more important than ever to ensure your lodgements are up to date and debts are being paid on time. Where you are not able to pay a debt on time, a payment plan is a good way to mitigate against these more serious methods of debt recovery being used by the ATO.

If you have any questions regarding ATO debts or the abovementioned collection methods, please don’t hesitate to contact your Hall Chadwick QLD advisor.

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