Tax debts drive record level of calls to financial helplines, as ATO denies 'heavy-handed' methods

Australia Broadcast Center

18 hours ago

Financial counsellors are calling on the tax office to give small businesses and individuals more time to pay tax debts, as the level of money owed sees calls to the debt helplines hit unprecedented levels.
More than 65 per cent, or $36.6 billion, of the $55.9 billion in total debt owed to the Australian Taxation Office (ATO) is owed by small business, according to the agency, which said much of that is undisputed debt.
But the ATO's increased use of its extraordinary powers to recoup tax debts is sending more small businesses under, and putting people into severe financial hardship.
"We've seen increased activity across that full spectrum of debt collection methods," Australia's Tax Ombudsman Ruth Owen said.
While Ms Owen understood the ATO's need to collect on debts, she said it needed to be more understanding of cost-of-living pressures and give people more time to pay.
These people who are pursued for money owed often don't have access to well-paid lawyers and accountants to give them the right advice and help them navigate out of crippling tax debts.
"Families, businesses are all struggling — there's a lot of bills, there's a lot of debt out there and they [the ATO] could do more to support taxpayers, to pay their tax when it's due, and give them appropriate arrangements if they fall into hardship," she said.
The ATO said, "following a return to ordinary debt collection activities in June 2023 and the implementation of a targeted payment strategy in August 2024, the annual rate of growth of collectable debt has slowed and is trending down".
The agency defended the way it goes about collecting debts owed.
"The ATO does not agree with the proposition that we take heavy-handed actions," an ATO spokesman told ABC News.
"We expect taxpayers to fulfil their legal obligations — that is to lodge and pay tax bills in full and on time."
A financial helpline for small businesses has told ABC News that calls have been running hot as the ATO ramps up debt recovery action, noting the agency's refusal to waive general interest charges in some cases.
The Financial Counselling Australia manages the Small Business Debt Helpline, as well as the National Debt Helpline.
In June alone, 559 cases were reported to the small business helpline. While it was down slightly from the record high hit in May, it was an increase of 31 per cent compared with June 2024.
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And 64 per cent of cases that came through to the helpline in June related to an ATO debt — up from 60 per cent a year earlier.
Throughout the 2025 financial year, ATO debt was also consistently identified as one of the top five reasons why people called the more general National Debt Helpline.
Over the past 18 months, almost 12,000 people have visited the National Debt Helpline website looking for advice on how to deal with a tax debt.
Overall, calls and chat messages to the helpline totalled 168,148 in the 2025 financial year, up from 162,376 in FY24.
Financial Counselling Australia's policy and campaign director Rebekah Sarkoezy argued the ATO's rigid policies and legal constraints have restricted access to financial hardship relief and debt release.
She said people struggled to access affordable repayment plans and other reasonable hardship options including deferrals, debt reductions, pausing the accumulation of interest.
"People are really desperately wanting to pay their tax debts. They're trying to find options, but they're finding … they're not able to get access to payment plans that they can actually afford or access to a bit of time to get back on their feet."
Some small businesses have been targeted by predatory lenders, in their desperation for cash to pay back ATO debts and avoid going under, while others have restructured their businesses to avoid insolvency.
The ATO told a recent parliamentary inquiry it had received 23,291 calls to its hardship line last year.
Calls increased steadily in recent years, with 20,325 calls in 2023, 17,914 in 2022 and just 12,102 in 2021, when the ATO had paused its debt recovery action because of the pandemic.
However, the ATO said "not all taxpayers who use the hardship line are genuinely experiencing vulnerable circumstances".
The UNSW tax clinic's supervisor Annette Tasker said their clients also included victims of fraud, where "accounts have been hacked or fraudulently obtained in some way" or where "refunds have been paid, sometimes into a mysterious bank account" that the client isn't aware of.
"Suddenly the tax office is trying to claw that debt back and the client, or the taxpayer, doesn't understand how it's occurred in the first place," she said.
Ms Tasker noted that in many cases, the people affected were experiencing severe problems like drug addiction and the tax debt has devastating impacts.
"There's a huge impact on their families, not only their own themselves and their children, but parents or anyone who's able to support them.
"They feel like they're just getting their lives back on track after these undesirable circumstances … and then suddenly they're taken down again. So mental health becomes a serious, serious issue and they just can't cope."
Ms Tasker argued the ATO lacked understanding of these unique and difficult circumstances and took "a hard line": "They have no sympathy whatsoever."
She said people are often faced with an ATO call centre representative saying, "'This is the rule, or this is our policy. This is our process.' It's very hard to get somebody who will … think a little more carefully about the individual."
Ms Tasker compared the way that those who have access to legal and tax advice are treated, to her clients who do not.
"Taxpayers should be treated consistently to ensure there's no special privilege because you're using a high-profile firm or adviser," she says.
The ATO said taxpayers who need additional time to pay may be eligible to set up a payment plan, and noted that as of May 31, there were over 631,000 active payment plans in place for over $11.1 billion of tax debt.
The agency said taxpayers can request to have interest charged on tax debts waived, and it is trying to "better understand the circumstances of, and provide support to, taxpayers experiencing vulnerabilities and cost of living pressures".
The ATO told ABC News it is "prioritising recovery action on superannuation guarantee charge, pay as you go withholding (PAYGW) and GST debts".
It said those that "repeatedly refuse to engage and continue to ignore reminders to pay, can expect ATO actions to escalate quickly".
The ATO pointed to data showing that over the year to May 31, 2025, collectable debt had increased by a smaller rate of 2.3 per cent, or $1.3 billion, compared to same period the year before (when it grew by 4.7 per cent or $2.5 billion).
Of the total $55.9 billion collectable debt owed to the ATO by individuals and small businesses, it said 79 per cent ($42.9 billion) is primary debt, 17 per cent ($9.3 billion) comprises general interest charges, and 4 per cent ($3.7 billion) relates to other penalties and shortfall interest charge.
The Tax Ombudsman has an investigation underway into the ATO's increased use of general interest charges, which are applied on top of hefty tax debts.
She said interest charges often caught people off guard, especially with a 10 per cent annual interest charge levied on top of tens of thousands of dollars of primary tax debts.
"What we're seeing because everybody is facing increasing pressures in their financial businesses or in their family budgets right now, is that it can cause real anxiety for people and mental health issues."
Ms Owen also argued it was unclear how the ATO is coming to decisions about whether to waive general interest charges.
"Feedback we're hearing is it's really, really inconsistent, that it's very, very hard to tell how they're making those judgements and decisions," she said.