Australian Taxation Office Management of Hardship

1. Australian Taxation Office Management of Hardship • Presented by • Lou Pezzimenti, Service Delivery, Debt • Tony Lazaris, Service Delivery, Debt • Financial & Consumer Rights Council • October 2016 • UNCLASSIFIED

2. Our Debt Collection Approach Our decisions are based on a consideration of each client’s individual circumstances, ensuring we; • Assist those attempting to work with us and do the right thing, and • Are firm but fair with those who choose not to work with us, continually default on agreed arrangements or don’t have the capacity to pay and don’t take steps to resolve their situation • Our debt position $. Key outcomes: • Optimising debt collections, and • Ensuring fairness for all taxpayers and a level playing field for business. • 2

3. Debt collection stages • Ongoing engagement with taxpayers • Individual circumstances taken into account • Fair and consistent decisions • Early intervention • Telephone • External collection agencies • Letters • SMS • Point in time Garnishee • Enforcement • Enduring garnishees • Director Penalty notices • Legal action • Bankruptcy proceedings $ • Time / Escalating risk • Exit points • Release (hardship) • Finalised payment arrangement • Payment in full • Bankruptcy • 3

4. How can clients help themselves? deffectively with tax debts DO • Know your responsibilities. • Act early - better for your client and for us and increases chances for getting back on track quickly • Prepare - all relevant information / consider sustainable options (allows us to identify the best option to help quickly) • Lodge on time (even if your client can’t pay) – this will ensure your client doesn’t incur failure to lodge penalties. It also ensures that, if applying for release, your client’s current debt is position is clear and the release application can be considered. DON’T • Avoid contact with the ATO • Break promises to pay or default on arrangements • Fail to provide information when requested • 4

5. Options for those experiencing hardship • Specialised team to assist taxpayers experiencing serious hardship or financial difficulty • Utilise a range of options (often in combination) including: • Payment arrangement • Remission of interest and penalties • Debts uneconomical to pursue • Release from income tax debt • Work closely with financial counsellors • 5

6. Our philosophy and focus • Natural Conversations • Cultural Traits • Client focused. • United & Connected. • Future Oriented. • Passionate & Committed. • Empowered & Trusted. • 6

7. What is Hardship ? • Someone would be considered in financial hardship if deprived of what are considered necessities to normal community standards. • Hardship is not defined by law and must be determined on a case by case basis • Various indicators of financial hardship are considered when assessing hardship applications. Release application or Hardship Correspondence. • Circumstances surrounding hardship can differ depending on whether you're an individual or a business. • 7

8. Hardship Considerations - Individuals • A person is considered to be in serious hardship when they would be left unable to provide for themselves, their family or other dependents in respect to the following: • food • accommodation • clothing • medical treatment • education • other basic necessities • 8

9. Indicators of financial hardship • 9

10. Indicators of financial hardship • 10

11. Indicators of financial hardship • 11

12. Indicators of financial hardship • 12

13. Assistance Considered - Individuals • Bring issues to our attention as soon as possible • Be prepared to discuss specifics To assist individuals we will consider: • lodgment and payment deferral • tailored payment plans • GIC remission • FTL remission • non-pursuit • credit refund instead of offsetting – in limited cases. • Waiver – via DOF. • release from your tax debt – Release application. • 13

14. Release from payment – who is eligible? • Release from payment is only available to individuals or trustees of deceased estates for: • Income tax • Fringe Benefit Tax (FBT) • FBT instalment; • Pay as you go (PAYG) instalment; • Penalties and charges associated with the above liabilities • 14

15. Release from payment – how to apply • Lodge all income tax returns and activity statements • Complete an ‘Application for Release’ form via www.ato.gov.au • Provide supporting documentation with application, e.g. - savings account and credit card assessments - medical certificates - payslips - Centrelink statements • Unresolved disputes, or compensation, damages or insurance claims need to be finalised prior to applying • ATO applies two tests to establish serious hardship - income and expenditure - assets and liabilities • 15

16. Release from payment – how to apply The case officer will consider other factors in determining if release of the debt is in the community interest: • Provision/capability to meet future obligations • Reason for the debt – how it arose • Previous compliance history Alternate solutions will be considered to enable those not eligible for release to meet their obligation or part of it. • The taxpayer is notified of the outcome within 56 days • Internal (ATO) objection and external appeals processes are available (Administrative Appeals Tribunal (AAT) and Federal Court) • For more information, refer to PSLA 2011/17 Debt Relief • 16

17. Release from payment – Case Study • Barbara (51 years old) has been unemployed for several years due to a range of issues including serious illness. • She is receiving Centrelink benefits. • Her debt of $45k is from an undeclared capital gain in 2004 and associated penalties. • Barbara has no assets, she is living in rental accommodation and relying on subsidies from her daughter and selling her furniture to cover expenses. • Her car was recently ‘written-off’ and she will have to pay damages of $10k on the other vehicle. • 17

18. Release from payment – Case Study Considerations and Outcome • Barbara’s unemployment is long-term. It is unlikely that she will return to the workforce • Barbara is in receipt of Centrelink benefits. Evidence indicates that people whose sole source of income is government welfare have little or no disposable income, and therefore are unable to sustain a payment arrangement. Barbara has no disposable income and would not be able to pay this debt off over a period of time. • 18

19. Release from payment – Case Study Considerations and Outcome • Barbara has no assets to sell to be able to furnish the debt and no capacity to borrow funds • It is unlikely that Barbara will incur future tax liabilities • Release granted. Payment of the debt would have caused Barbara serious hardship and there is little or no prospect of her financial situation improving significantly. • 19

20. Hardship Considerations - Business • Serious hardship means financial difficulty associated with: • business closure • disconnection of an essential service • repossession of a vehicle used for business purposes • imminent legal action pending for non-payment of debts • period of review limitations • court orders • settlements • other necessities for the business or people you are responsible for • 20

21. Assistance Considered - Business To assist businesses we will consider: • lodgment and payment deferral • tailored payment plans • GIC remission • FTL remission • non-pursuit • 21

22. Assistance Considered - OTHER Individuals • Tax help – ITR lodgment • Bankruptcy Business • Business assistance visits - https://www.ato.gov.au/Business/Register-for-personalised-business-assistance/ • Insolvency General • Financial advice • 22

23. Contacting the ATO about a debt Call our account management information line on • 13 11 42 between 8:00am and 6:00pm Monday to Friday Payment arrangements (debts under $100k) via our 24 hour automated self-help phone service • Businesses – 13 72 26 • Individuals – 13 28 65 Call our financial hardship hotline – 1300 788 347 • For those with clients who have a tax issue or are suffering serious financial hardship • 23

24. Self-help – information and tools Consolidated payment information to help taxpayers understand • their payment options • the help we offer if they can’t pay their tax on time Information about the support available for taxpayers • experiencing serious hardship • people affected by disasters www.ato.gov.au/Individuals/Payments-to-ATO/ www.ato.gov.au/general/financial-hardship/ www.ato.gov.au/individuals/dealing-with-disasters/ • 24

25. Self-help – information and tools A range of online tools, including • payment arrangement calculator • business viability assessment tool A range of tools and information via the ATO app, including • payment plan estimator • business performance check tool www.ato.gov.au/calculators-and-tools/ www.ato.gov.au/General/Online-services/ATO-app/ • 25

26. Any Questions • 26