SMEs warned as ATO ramps up tax debt collection

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The ATO is setting its sights on small business collectable debt following the Australian National Audit Office’s (ANAO) recommendation that the Tax Office establish volume targets to collect the $65 billion tax shortfall from the SME market (for 2024–25), with the insolvency specialist saying that too many business owners are putting their “head in the sand” with their tax debts.

The insolvency specialist said that these business owners are putting their personal finances at risk by not seeking advice until the ATO takes punitive action against them.

Speaking to Accountants Daily, Jirsch Sutherland partner and insolvency specialist Malcolm Howell (pictured) said: “The ATO has a responsibility to recover outstanding tax debts and this audit is another warning shot over the bow for small businesses.”

Howell noted that many small businesses do not realise that they are losing money.

“No business [advice] ever seems to have a proper cash flow [system], and that's a real problem. They don't realise they're actually losing money on a daily basis.”

“These people were letting the tax debt accumulate in the background while they pay those creditors that they need to pay to keep the business going on a day-to-day basis, and it might be a bit of a COVID mentality that … they still think the ATO is going to be approachable and negotiable on the tax,” he added.

Following the reduction of tax collection activities during COVID-19, the ATO recommenced further actions in 2023–24. 

This included “garnishee actions, directions to pay, director penalty notices and disclosure of business tax debt actions,” ANAO said in its ATO Management of Small Business Collectable Debt 2024–25 report.

“[Some small business owners] bury their head in the sand, and they think that they can pay later, and later never comes,” Howell said.

He stressed that businesses often realise they are in trouble only after they receive a director penalty notice (DPN), and that just because the ATO has not sent any warnings yet does not mean you are in the clear with your tax debts. 

“That doesn't mean that you're not on the radar, that just means that you haven't heard from them yet, and they'll strike at any moment.”

“If you're not seeing your accountant who stays on top of your tax debts and other debts, if you're not realising that [your tax debt is] creeping up, that's what hits you between the eyes … one day, it's going to come out of the woodwork, and you'll get that DPN when you least expect it.”

16 July 2026
Carlos Tse
accountantsdaily.com.au