ATO escalates debt war: $105b owed, deploying full force to collect

The Australian Taxation Office’s debt book has ballooned to $105 billion – the largest in its history – and the ATO is stepping up its campaign to collect what it’s owed. For directors, the message is clear: enforcement is no longer a threat, it’s a reality.

Commissioner of Taxation, Rob Heferen recently acknowledged the scale and urgency of the issue, saying: “It’s the largest it’s ever been, and it is money that could be benefiting all Australians.”

With around $46.4 billion classified as collectable debt, the ATO is sharpening its focus on those who continue to ignore payment obligations or fail to engage. Heferen points out that only 22,000 taxpayers are responsible for $11 billion of the total collectable debt. “In context, that’s about one per cent of the total debtors responsible for 20 per cent of what’s owed,” he explained.

And while all tax owed is a priority, the ATO is focusing on specific types of debt, including unpaid superannuation, PAYG, and GST that was collected from customers but not passed onto the Government. Additionally, it’s targeting a small group of taxpayers who “exhibit the most non-compliant behaviour in avoiding their obligations”.

“This approach we are taking to collect the tax owed to the government is deliberate and targeted, with action being taken for those who repeatedly refuse to engage with us and continue to ignore our reminders,” Heferen says. “We are moving more urgently to deploy the full powers available to us.”

Inside the ATO’s enforcement arsenal

The ATO’s debt recovery strategy includes a range of weapons designed to prompt action – or force it:

• Director Penalty Notices (DPNs) – holding directors personally liable for unpaid GST, PAYG and super.
• Garnishee Notices – allowing the ATO to claim funds directly from a business’s bank or debtors.
• Engaging debt collection agencies – third-party firms are actively pursuing outstanding tax debts.
• Tax debt disclosure – businesses can be reported to credit agencies, damaging their credit and reputation.
• Wind-up applications – forcing non-compliant businesses into liquidation.
• Bankruptcy Notices: issued to individuals who owe more than $10,000, potentially leading to personal bankruptcy proceedings.
• Departure Prohibition Orders – stopping individuals with large debts from leaving the country.

The ATO’s crackdown is already hitting home. According to the latest Alares Credit Risk Insights, more than 30,000 businesses are now subject to tax debt disclosure. Many are already feeling the flow-on effects of credit rating damage, tighter cash flow, or legal action.

Chris Baskerville, Partner at Jirsch Sutherland, says it’s crucial for directors and business owners to take early action. “The ATO has made it clear that enforcement is a priority, and we’re seeing the consequences play out across businesses of all sizes. Directors can’t afford to sit back. If there’s tax debt or non-lodgement, the time to act is now.

“It’s also a critical time for accountants and other trusted advisers to step in. We encourage them to help their clients get ahead of the problem. The earlier we can step in, the more options are available, whether that’s a payment arrangement, restructuring, or a formal insolvency solution.”

Don’t get caught in the crossfire

“At Jirsch Sutherland, we help businesses and individuals navigate financial distress and find a way forward. Whether it’s negotiating with the ATO or managing insolvency risk, we’re here to help you fight smart – and rebuild stronger,” adds Baskerville.

Contact Jirsch Sutherland today to explore your options before the ATO deploys its weapons.