A1.1 On 21 April 2004, the Inspector-General announced the terms of reference for his review into the Tax Office's small business debt collection policies and practices. These were:

This review will investigate the fairness of the ATO's small business debt collection policies and practices. It will examine some of the perceptions and concerns raised by stakeholders in the course of the scoping review and prioritisation project. It will evaluate whether the ATO's small business debt collection policies and practices strike an appropriate balance between the competing underlying tensions of efficiently collecting tax debts and recognising the benefits of viable businesses' ongoing trading.

It will focus upon the following matters:

  • to identify and determine whether the ATO small business debt collection policies adequately take into account the provision of assistance to small businesses who wish to meet their tax obligations without harming their underlying viability;
  • to consider the manner in which the ATO implements its small business debt collection policies;
  • to examine the impact of the ATO's small business debt collection policies and practices on aspects of small business tax debt collections, particularly:
    • the impact of the ATO's current approach to payment arrangements in assisting small businesses get out of debt without unduly affecting the viability of the business;
    • the ATO's management of debt collection cases, including their timeliness, co-ordination and commercial approach, with regard to the Taxpayers' Charter and the Compliance Model;
    • whether the Commissioner's policies and practices unnecessarily force small businesses into either bankruptcy or liquidation;
    • the consistency of the Commissioner's exercise of a release from tax debts based on serious financial hardship (Division 340 of Schedule 1 to the Taxation Administration Act 1953, previously section 265 of the Income Tax Assessment Act 1936) with the legislation's underlying policy; and
    • the ATO's approach to the compromise of tax debts.