The tax office has stopped sending letters warning of sometimes decades-old tax debts, acknowledging the letters were causing “unnecessary distress”.
The Australian Tax Office (ATO) says it was running an awareness campaign about “on-hold” tax debts, which are not required to be immediately paid but will be taken from future tax refunds and credits.
What are ‘on-hold’ debts?
“On-hold” debts are often very small and can date back several years. The tax office makes a decision not to pursue repayment of the debt, usually because they’re not “economical” — that is, it would cost more to chase down the debt, than the value of the debt itself.
But, critically, the debt is not waived — it just sits on the tax office books indefinitely. If a person carrying an “on-hold” debt eventually lodges a tax return and is eligible for a refund, the ATO can claim back the debt from that refund.
The ATO’s letter-writing campaign was aimed at anyone with an on-hold debt, even if they were unlikely to need to be repaid anytime soon.
If you have ‘on-hold’ debts, contact our Walker Hill Accounting team today! support@walkerhill.com.au.
