The Australian Taxation Office (ATO) has drawn the anger of the small business Ombudsman for its alleged practice of issuing garnishee notices for unpaid taxes and penalties while the matters were under dispute.
In a report on early debt recovery action prepared by the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell (pictured) accused the ATO of issuing garnishee notices in cases where disputes were before the Administrative Appeals Tribunal (AAT).
Ms Carnell has called for the ATO to immediately 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, severely impacting a small business’s resources to prosecute its case and carry on its business,” Ms Carnell said.
“Strong forms of debt recovery action by the ATO, such as garnishee notices, can destroy a small business because it effectively strips funds from a small business’s bank account.”
She said that as a consequence, the small business was not able to pay wages, rent, suppliers or bank loans and the follow-on effects of this — bad reputation, no credibility and potential bankruptcy — were significant.
“Despite the devastating impact on small businesses, the ATO alone has the authority to produce garnishee notices without any external oversight,” Ms Carnell 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,” she said.
“They simply don’t have the same resources to fight where there is a legitimate dispute.”
The Ombudsman’s 15-page report and the ATO’s response can be accessed at this PS News link.
