The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has urged the Australian Taxation Office (ATO) to reconsider returning to heavy-handed tactics, with collection action expected to ramp up as debts owed hit a record high.

Ms Carnell says she is concerned small businesses – including salons – may be subjected to the harsh debt recovery actions inflicted prior to the COVID crisis, given collectable debt owed to the ATO has peaked at $34 billion – the majority of which is owed by small business ($21 billion).

“The ATO rightly took a softer approach towards small businesses during the COVID crisis, but we don’t want to see a return to the extreme enforcement actions my office brought to light just a couple of years ago,” Ms Carnell says.

“Previous actions such as garnishee notices have crippled small businesses, so it is critical the ATO uses its powers proportionately and appropriately, particularly as small businesses work to get back on their feet.”

Ms Carnell has called for a range of reforms to address her concerns regarding the ATO’s treatment of small businesses in a new report: A tax system that works for small business.

Recommendations include waiving interest and penalties for a first offence, restricting ATO review and audit periods to one year when a small business is using an accredited tax or BAS agent and immediately ceasing debt recovery action against a small business that is seeking a review of its tax position, regardless of whether the dispute is before the AAT.

“It’s important that small businesses in dispute with the ATO are given a fair go,” Ms Carnell says.

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