An investigation and exploration of undisputed tax debts in Australia
We have commenced our analysis of the large volume of data on undisputed tax debts (referred to as collectable tax debts by the ATO) to identify heat spots and potential areas that may warrant further investigation. This analysis will cover figures provided at a global level, which show that undisputed debts have continued to grow both at a headline level and within each of the major components as set out below.
We will be analysing information to explain the growth in undisputed debt by market segment, industry groups, heads of tax (including primary tax, interest and penalties) and geographical location. We believe this will enable a more in depth and holistic examination of activities and areas that may be contributing to increasing levels of collectable debt.
As part of this process, we are engaging with the ATO at all levels to understand their data and to identify other sources of information that may shed further light on the issue. As we progress further into the review, we aim to provide more fulsome updates leading up to the release of the final report.
Death and Taxes: An investigation into ATO systems and processes for dealing with deceased estates
We have engaged with a range of external stakeholders including legal and tax practitioners, public officials and individuals who have been appointed executors or administrators to understand their experience in dealing with the ATO on matters relating to deceased estates. Based on our early discussions, it appears that a large proportion of taxpayers who die do not leave behind complex affairs or estates and for these taxpayers, we are exploring ways in which the compliance burden for executors and administrators may be reduced entirely. For others, the concerns and issues which have been raised with our office are currently being examined to identify potential improvement opportunities which may reduce red tape and compliance costs. The range of issues raised with us in this review and are the subject of investigation include:
- engagement difficulties and information access concerns arising from the ATO not providing information to a ‘representative’ of the deceased taxpayer unless and until there has been a court grant of probate or letters of administration. In some cases neither probate nor letters of administration are required by succession law. Accordingly we are exploring what authority is necessary for the ATO to provide and receive the deceased taxpayer’s information;
- the need to apply for a new TFN (for a trust) and lodge a trust tax return to secure refunds of franking credits after death;
- complex tax compliance arising from obligations for executors/administrators to lodge two types of returns for a deceased person (date of death return and deceased estate trust returns) and the complexities associated with trust tax law;
- difficulties in tax agents accessing information of the deceased taxpayer;
- confusion regarding the need to lodge prior years' returns for a deceased taxpayer – including situations when they are below the tax free threshold;
- whether ATO guidance and advice for deceased estates is ‘fit for purpose’; and
- delay in registering the death of the taxpayer following notification.
We are continuing to engage with the ATO’s subject-matter experts throughout the review process and aim to finalise the review and release the report early in the year.
We also note that on 13 January 2020 the ATO issued Taxation Administration (Remedial Power - Disclosure of Protected Information by Taxation Officers) Determination 2020. This determination modifies the operation of certain tax secrecy rules in Division 355 of Schedule 1 to the Taxation Administration Act 1953. The modification ensures that a taxation officer can disclose protected information of a deceased person to the registered tax agent, BAS agent, or legal practitioner of an executor or administrator of the deceased estate. The determination will take effect once the period for its disallowance (as set out in section 42 of the Legislation Act 2003) has passed.