The amount of business tax debt that is overdue with the Australian Tax Office has skyrocketed by 14% in 12 months to $40 billion. This is a very worrying sign. A business which is struggling to keep afloat will try and delay their payments for as long as possible, hopefully to keep some liquidity and survive another day.
Eventually however, many businesses can’t keep going like this and collapse. This blowout in overdue debt is a worrying sign of how many businesses in Australia are on the edge. The Government’s response to COVID has wrecked our economy and country and the full effects of lockdowns and restrictions are still to be fully felt.
Transcript
Around. Thank you.
Okay. Senator Roberts.
Thank you chair, and thank you all for attending. Minister, When all the COVID protections, when are all the COVID protections ending for businesses? You know, for example, the Australian taxation office pause on debt collection activities, and what have you provided to ensure businesses are supported and not thrown to the wolves?
Well, Senator, to answer the second part of your question, types of measures that we outlined in the last couple of budgets, such as, the lost carryback arrangements, the small business loans programmes, they’re the types of support that have been embedded for businesses to help with the economic recovery coming out of COVID. In terms of the dates of when, in some cases already have occurred, or to occur in the future. Certain protections around solvency arrangements, or ATO debt recovery practises, coming to end. I’ll let agencies, where they can speak to any of the details of those. Probably not the right person for that though.
So Senator, there’s a range of support measures that have been provided. The minister referred to the loss. Carryback there’s also obviously the temporary full expensing measures that go to June 2023. They’re the support measures, stimulus measures that I’m aware of in the tax space. I will pass to the ATO who can talk about the administrative actions that they’ve been taking to support business. And I think some of your question or some of the aspects of that support in the space of insolvency or, you know, market front features is probably best put to markets group later this evening. But I don’t know if the ATO want to add anything on the administrative actions.
Yes, Senator. We have recommenced the very measured approach to debt collection. We are concerned that the longer businesses sort of stay out of engagement with us. The more problematic those collection of debts are. I mean, the fact of the matter is that our total collectible debt has, as at 31 December, 2021, has increased by nearly $5 billion. That is collectable debt which is largely, I understand undisputed debt. So they’ve put in a bad statement. They’ve said, they’ve earned this amount. They’ve withheld pay as you go, they’ve collected GST, and for one reason or not, they haven’t remitted amounts they’ve acknowledged they’re responsible for. We are instituting a process of contacting businesses individually to make sure they’re aware of the debt and trying to come to an acceptable payment arrangement at least. But it is something we just cannot ignore because of the debt stock has gone up about 14% from the same time last year, and it’s now around $40 billion. So we have to focus in as empathetic way as we can. But it’s something we just have to get on with without jumping out there too quickly. It’s very well known in the advisory community that we are doing this now. And in some cases they’re saying, well, you should because the longer we leave it the more likely some of these amounts just won’t be paid. But if our Chief Service Delivery Officer wants to add anything to that, I’ll pass over to Melinda Smith.
I thank you. Commissioner Melinda Smith. Chief Service Delivery Officer. I just echo the commissioner’s comments. Last year, we actually had over 8 million engagement activities that we put in place to help small business and individuals. And the growth tends to be in the small business debt to actually help them and assist them to understand what’s their liability and how do we help them to actually get back on their feet. And we’re seeing some positive signs payment plans are being set up. We have very high kept rate in terms of those effectiveness of those payment plans. And as the Commissioner commented, we’re getting some terrific feedback from the community about the balance we’re having to take very empathetically based on quite unique circumstances.
Thank you. So it it’s fairly, and this is not a criticism of you. It’s a comment about the situation. It’s fairly vague. And I understand that. So what does your research indicate will be the likely business insolvency rates for the next two years and across what industries and regions
Senator, I don’t know that the ATO, and they can obviously speak for themselves. We don’t know the ATO undertakes its own modelling or research in relation to business insolvency rates. And again, revenue group of treasury wouldn’t be the right agency to provide analysis in that regard. To just add to at least answer to your first question. I just wanted to check but the relief for directors against personal liability for insolvent trading, that was part of the initial package of measures has also expired. So, in that sense some of those initial early extreme COVID protection measures that were put in place at the depths of uncertainty have come to an end as the ATO indicated from their perspective, they now manage debt recovery in their cautious and targeted ways that they’ve indicated and are very conscious in terms of, in terms of the impact of their activities and seeking to maintain business viability while doing so. The government did outline some other insolvency reforms which I can get some information tabled if you like. I’d note that insolvency rates have been down quite significantly as a result of both some of those temporary measures, but also the additional financial support government has provided to businesses during the pandemic. I’m not aware of there being any spike in those insolvency rates since any of these measures have come to an end. But we would expect to see at least a normalisation of those rates.
Minister. Thank you. The early on. And in fact, the first and second day of sitting single day sessions on this coronavirus issue were on Monday, March 23rd, 2020, and then Wednesday the April 8th, 2020. And I pointed the government to Taiwan. Which has had a far superior performance to ours. They, despite having a population similar to ours, have had one quarter that casualties per million population that we’ve had. They did it without locking down. In the previous Senate estimate sessions, I confirmed with the Chief Medical Officer and the Federal Department of Health Secretary, the seven components that would be suitable for seven strategies for managing a virus comprehensively and properly. And the Federal Government has missed the two key ones. Never even looked at it even though they were mentioned months ago. And as I said on the first single day sessions back in 2020. I believe the Federal Government has mismanaged COVID. Now you probably won’t agree, but,
No I won’t Senator.
But you know, the facts are there. So, What’s happening is that the Federal Government has not protected people. And at the same time has decimated their economy and we are losing a lot of revenue.
Senator Roberts. Have you got a crisp question-
Yes. I’d like to know when the government is gonna come up with a proper comprehensive plan.
Well, as, you noted on the way through Senator Roberts, I don’t agree with your assessment there. Australia has some of the lowest fatality rates in the world and some of the strongest economic outcomes, a jobs market that is booming and is seeing levels of participation that are at record points for Australia and are above the performance of other developed economies. So Senator Roberts, I think we have a very strong record there as Prime Minister’s indicated. Has every decision that we have managed to, that we have made right throughout the course of the pandemic and being the one that we would make with the benefit of hindsight. No, of course not. If we’d been able to foresee every potential twist and turn along the way, we would navigate the route differently. But we’ve been dealing with the global pandemic with different variants that have come along to the COVID 19 virus and we’ve responded accordingly. We have applied through the last two budgets in economic recovery plan that has stimulated business investment that has seen the jobs market recover very strongly in Australia, that has seen the budget improve in ways beyond what had been forecast. And we’re obviously committed to continuing to implement that plan.
Thank you for that minister. I just quote some figures here from Adam Creighton. He’s a well respected, clear thinking economist who relies on data. And he’s pointed out, Australia overtakes Japan in COVID deaths, a densely populated nation with many old people that never once lockdown, never mandated vaccines and barely tested anyone. No riots, no tear gas. The lockdown argument has become a sad joke. You didn’t implement lockdowns, but you enabled the states to. Taiwan with a similar population to ours. We have 4.4 times higher death rate per million population. Taiwan never locked down. They properly tested, traced in quarantine. So my question was, when will you, I’ve checked with this Chief Medical Officer. There are seven strategies that he confirms. I’ve omitted none. I’ve got none that are in there that shouldn’t be there. Seven strategies. The government is not doing the two most important ones. When will you come together with plan
Senator Roberts? We have applied a plan right throughout the pandemic, responded to circumstances and have the clear economic recovery plan as I said before. I’d also just make the point in terms of your comparisons there, that lockdown is used as a single word or phrase to encompass what different people have in mind. There have been, in the countries you referenced, some very tight restrictions on human movement and activity in response to what, COVID 19 and limitations in terms of areas of activity that have had in terms of economic impacts and impacts on different businesses. Very significant impacts in parts of their economy. There are circumstances that every country’s grappled with. I don’t say that as in any way as a criticism. We have indeed engaged quite closely at different times with Japan and with Taiwan during the pandemic in terms of sharing information, in terms of assistance between between one another where possible for things like PPE or the like, so. There is much that we admire and respect about their responses, but I think to sort of characterise as you have that makes it sound like they’ve managed in a way where there haven’t been some very tight restrictions that are analogous in parts to the way some of the states have applied lockdowns or ongoing restrictions is not accurate in terms of what they have actually done in those countries or in the country of Japan and of course the economy of Taiwan.
Of Taiwan, which is way in front of us in terms of performance on COVID has not locked down. Their economy and their economy has basically suffered just a minor blip. I think 0.6 of-
Senator Roberts. I need to share the call.
Thank you chair. I’m finished.
Excellent.
