During the Covid-19 pandemic, the Australian Taxation Office (ATO) adopted a more lenient approach toward small businesses struggling with GST, PAYG tax, and income tax obligations. This temporary reprieve allowed many businesses to keep their doors open despite mounting financial pressure. However, the ATO’s leniency has now come to an end, and its post-pandemic crackdown on tax debt has begun.
This shift is causing concern across many industries, particularly for recruitment and labour hire firms, which often operate on tight margins. If your business falls into this category, it's critical to understand what’s coming and how you can prepare for the new financial reality.
What’s Happening Now?
Rob Heferen, the new commissioner of the ATO, has recently highlighted the seriousness of the current tax debt situation. According to reports from ABC News, small businesses collectively owe the ATO approximately $24 billion related to their business activity statements (BAS). Heferen stressed that many businesses are finding it increasingly difficult to keep up with these payments, which can lead to severe financial stress and, in some cases, closure.
Small businesses, including those in recruitment and labour hire, represent 65% of the ATO’s collectable debt, which totals $32.5 billion. Over the past four years, the ATO’s total collectable debt from businesses and individuals has skyrocketed from $26.5 billion in June 2019 to a staggering $50.2 billion in June 2023, an increase of 89%. These figures are alarming and underscore the challenges that businesses across Australia are facing.
Aggressive Debt Collection Measures
In response to this growing debt, the ATO has adopted more aggressive collection tactics. Businesses with unpaid tax obligations, including those in recruitment and labour hire, now face the possibility of audits, investigations, and even forced closure if they fail to settle their debts. This marks a sharp contrast to the flexibility shown during the pandemic and should serve as a wake-up call for business owners.
While the ATO does offer payment plans to help businesses manage their debts, these plans come with a general interest charge of 11.36%. High-interest rates and short repayment terms can place significant strain on a business’s cash flow. For many recruitment and labour hire firms, meeting these repayment conditions could prove overwhelming.
What Can Recruitment and Labour Hire Firms Do?
One effective option for businesses facing ATO debt is to refinance through their current facilities with APositive. Unlike traditional lenders, APositive specialises in providing flexible finance solutions for recruitment and labour hire firms, helping them cover tax repayments while maintaining cash flow. This support can be critical in allowing businesses to meet their financial obligations and continue growing.
Take the First Step Toward Tax Debt Relief
If your recruitment or labour hire business is struggling with ATO debt, don’t delay—reach out for assistance. At APositive, we understand the specific pressures of the recruitment industry, and we’re here to help you navigate this challenge. Contact one of our consultants or client relationship managers today at info@apositive.com.au or 1800 276 748 to discuss how we can support your business.
Disclaimer: The information provided in this article is general in nature and does not constitute financial advice. Please consult with a qualified financial adviser or tax professional to understand how these changes may impact your specific situation.
