Other helpful reports and information

The ATO should notify taxpayers about the decision to write off their debt indicating that there is an amount owing which the ATO has decided not to pursue at that time but may seek to do so later, the amount(s) that has been written off and the type of tax to which it relates. This information should also be provided on all notices of assessment related to the tax account.

The primary reason for non-pursuit of debt classed as uneconomical to pursue is that taxpayers are untraceable, overseas or deceased. In these cases it would be inappropriate to attempt issue of a letter.

In instances where debt is written off and there is ongoing contact with the taxpayer, the ATO will advise that the amount to be written off will not be pursued at this time.

From time to time the ATO may undertake further bulk write-offs of small debts without attempting additional contact, for example, after exhausting automated letters and referral to external collection agencies. In these instances, the ATO considers that the resources required to attempt additional contact should be applied to higher risk debt and more productive collection activity.

The ATO does not consider it viable to alter the format of the notice of assessment to add information on debts written off and not re-raised. The system changes are substantial for the relatively small number of taxpayers with written off debts who subsequently lodge returns. Furthermore, implementation of later recommendations relating to re-raise decisions would substantially reduce the instances where the notification would be required.

The ATO should provide further information to taxpayers when a debt is re-raised.

This information should include the source of the debt (including how much interest has been charged), the circumstances which caused the debt to be re-raised and how to obtain further information.

Debt re-raise procedures will be adjusted to ensure that the taxpayer is advised in writing of the source of the debt, the amount of interest charged and the reasons for re-raise. As changes to the notice of assessment are not viable, this information will be provided in a separate letter that will issue when the re-raise exception is actioned.

The ATO should ensure that the reasons for debt write-off and re-raise decisions are more clearly recorded, including decisions about application and remission of interest charges. Records of re-raise decisions should show what factors and criteria were applied and the reasons that interest charges were or were not remitted. Debts written off as a result of a bulk non-pursuit process could have standardised explanations but should still reflect which factors lead to the decision in each case.

The ATO has ongoing review processes to examine the clarity and appropriateness of narratives. Examples include technical quality reviews (introduced in 2001) and team based quality assurance. In the context of a high volume outbound collection environment, these processes must balance the additional resources that extended narratives require against using the same resources to achieve additional productive collection conversations. There has been significant improvement in the quality of narratives as the ATO has migrated from host and case management systems where narratives may have been more restrictive and, as a result, less informative.

Current procedures require that a summary of all actions taken on a case be recorded in a narrative. Debt re-raise procedures will be adjusted to include a list of the specific information that must be recorded when a debt is submitted for non-pursuit and when a debt is re-raised.

The bulk write off process is limited by the amount of information that can be recorded as a note on the current computer system and the fact that the wording is encoded in the bulk non-pursuit process. The ATO does not consider it viable to attempt any system changes in the foreseeable future due to Change Program priorities and less future reliance on bulk write-offs as older cases are progressively cleared.

The ATO should not re-raise debts which pre-date the introduction of the ATO Integrated System (AIS) to avoid problems with archival of older account postings on legacy systems. Consideration should be given to the reasonableness of seeking to recover debts which have not been pursued for many years, taking into account the period of time for which taxpayers could be expected to retain relevant tax records.

The ATO accepts this recommendation, recognising that there may be the odd exception for cases involving fraud or serious non-compliance. The ATO agrees that consideration should be given to the reasonableness of seeking to recover debts which have not been pursued for many years, taking into account the period of time for which taxpayers could be expected to retain relevant tax records. The implementation of the criteria trialled in the re-raise pilot project has shown that debts written off more than seven years ago will not generally be re-raised.

The ATO should ensure that the criteria used in deciding to re-raise a debt are clearly related to whether it is economical to pursue the debt and whether it is efficient, effective and ethical to do so. This should include consideration of whether other triggers for debt re-raise, such as taxable income, should be applied.

The Tax Office acknowledges that, in order to ensure outcomes are appropriate to taxpayers’ individual circumstances, the criteria used in decisions needs to be economical, efficient, effective and ethical.

The ATO accepts this recommendation and will implement the criteria trialled in the re-raise pilot.

The ATO will consider the merits of using government pension and offset indicators instead of taxpayer age when adjusting the procedures.

Implementing more structured guidelines will promote a consistent approach to the re-raise of debts. The updated criteria will consider taxable income and therefore reduce the impact on low income earners caused by the $500 re-raise threshold.

Increasing the $500 threshold may be considered in the future. However, due to Change Program implementation priorities, the required system adjustments are not likely for some time.

The ATO should monitor the impact of its bulk non-pursuit process to ensure that this is operating appropriately

The ATO had been monitoring the bulk non-pursuit process to ensure that there were no unintended consequences of writing off a significant number of small debts in early runs. This monitoring helped refine criteria for further write off runs that were undertaken. When considering the rate of re-raise compared to the number of cases processed through bulk non-pursuit, there is no evidence of adverse systemic issues.

The increases in the number of debt re-raise cases in the same year and the value of re-raised debt seems to be a leading factor behind this recommendation. Further analysis of the large value cases has shown that they were not related to the bulk non-pursuit process. Rather, they were cases involving bankruptcy. The Tax Office is legally obliged to retain refunds for the period of bankruptcy, which is generally three years. The increase in the number of debt re-raise cases can be explained by a significant rise in the number of bankruptcy cases since 2004. Due to the legal obligation to retain income tax return credits, these cases are often re-raised more than once.

The number of cases available for bulk non-pursuit will gradually decline due to the nature of the criteria that the cases are required to meet. Nonetheless, the ATO will continue to monitor impacts of the bulk non pursuit runs.