The numbers are out. And ATO collectable debt is up by a whopping 30%. This is not a surprise to most of us. In fact, the more worrying thing is how much ATO debt is NOT included in this number…

The impact of deferral

Question: What happens when the ATO allows companies to defer payments? Answer: DEBT MOUNTAIN.

ATO Collectable Debt

2017/2018                  2018/2019                  2019/2020

$23.8billion                 $26.6billion                 $34.1billion

At the end of last year (FY 2018/19), the ATO recorded a record $26.6billion in collectable debt. This year (FY2019/20) another record has been set, and that number has risen to $34.1billion. It’s a staggeringly large amount of money (and doesn’t include the $19.2billion that is being appealed or is insolvency debt).

The majority of clients we help with ATO debt are small-medium business owners; they represent more than 60% of that overall collectable debt.

ATO Collectable Debt: Small Businesses

2017/2018                  2018/2019                  2019/2020

$15.1billion                 $16.5billion                 $21.4billion

The previous period’s year-on-year debt growth was approximately 9%. Current year-on-year growth is almost 30%. Even just on face value, it’s a pretty scary uplift.

Mountain… or iceberg?

Even more worrying than the size of these figures, is that it may be more accurate to describe this not as a mountain, but as the proverbial iceberg… where that declared collectable debt is just the little bit we can see so far; the real size of the debt is way larger.

Why? Well, the impact of covid will only have shown in this reporting from the last quarter of the financial year. So effectively these figures show three quarters of “normal” debt growth and one quarter of “covid” debt growth. The iceberg factor will become evident when we see the impact of a whole year of covid-based debt deferral in the ATO’s figures for FY2020/21…

As businesses, our debt profile is rising. The more we defer, the more that debt will swell. This is likely to show in a huge spike in collectable debt when the ATO releases these numbers in October 2021 for the current financial year.

Make a plan for your own debt

While these figures paint a worrying picture for overall small business debt, the bigger picture does not need to be YOUR picture.

The ATO has been flexible as we all claw our way out of the economic impact of this pandemic. But actually, the ATO re-started debt collection in September. They are keen to start chipping away at the debt… for their own debt management and for the good of the businesses they serve: debt deferral is not a strong business strategy!

We are helping clients every day to create manageable long-term strategies to deal with deferred debt. We’re working collaboratively alongside the ATO to get clients into plans that match their cashflow projections. And we’re working hard to maximise refunds from clients’ current (or old) interest and penalties; refunds which are making a huge difference for many.

Tax Assure really can make a difference for you, so that you’re not part of the future ATO debt mountain!

We help you get a plan in place, you concentrate on running your business. Talk to us today. We’d love to help.