The Australian Taxation Office must be considerate of a person’s circumstances, Australia’s inspector general of taxation has warned, after a spike in complaints over a third-party collector used to chase tax debts.
On Monday, Guardian Australia reported that the ATO had referred more than 355,000 taxpayers, including welfare recipients, to the private equity-backed debt collector Recoveriescorp since January 2024.
One of those taxpayers detailed her experience of being given one week to pay $2,590.33 or risk further recovery action, which Recoveriescorp said included possible legal proceedings.
The ATO referred the welfare recipient to Recoveriescorp even though she was repaying her debt through weekly instalments to the tax office at the time.
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The inspector general of taxation and ombudsman, Ruth Owen, said people with tax debts were often already in financial distress.
“We are receiving an increasing number of complaints about the ATO’s debt collection processes,” said Owen, who is authorised to investigate systemic issues in the tax system and respond to taxpayer complaints.
“Quite often these are from people who are making efforts to do the right thing and pay back their debt.
“While I recognise it is the ATO’s role to collect tax that is legally due, I do expect them to take into consideration individual taxpayer’s circumstances.”
The ATO’s use of a private debt collector is part of a broader push by the government’s chief revenue office to rein in outstanding debts, and its first use of a third-party collector since before the pandemic.
In 2019, the tax office defended its use of external debt collectors by arguing at Senate estimates they were only used for a “simple, straightforward follow-up of an undisputed debt”.
The ATO started using Recoveriescorp, which is housed in an investment fund run by private equity group Allegro, last year as part of a firmer approach to debt collection with arrears in Australia now above $50bn.
It has referred 355,478 taxpayers to Recoveriescorp since the start of 2024.
‘Deep cultural problems’
Independent federal politicians have sharply criticised the use of a private debt collector to pursue at-risk individuals, labelling it “heavy-handed” and indicative of “deep cultural problems” within the ATO.
Independent MP Andrew Wilkie said the ATO had failed to learn from the robodebt scandal by using strong-arm tactics against vulnerable people.
“We have now seen a pattern of behaviour that points to deep cultural problems within the ATO,” said Wilkie, who was a fierce critic of Centrelink’s disbanded robodebt recovery program.
“At the end of the day it is the government that is responsible for the ATO and it is their challenge to now step in and fix it.”
Independent MP Zali Steggall said she was deeply concerned by the new tactic.
“This heavy-handed approach appears to be completely disproportionate, targeting the vulnerable rather than big companies that avoid paying their fair share of tax,” said Steggall.
“These reports have echoes of the robodebt debacle: a harsh and impersonal system of revenue collection that risks punishing people already doing it tough and who don’t have the means or capacity to properly defend themselves.”
A spokesperson for Recoveriescorp owner Allegro said the company was not authorised to comment due to contractual obligations.
An ATO spokesperson said external collection agencies provided additional capacity to engage with more taxpayers to address their liabilities.
“The ATO works to support taxpayers who are facing serious hardship, and the extent to which our staff can recognise and respond to these circumstances is a continuing area of focus,” the spokesperson said.
Do you know more? Email jonathan.barrett@theguardian.com
