Tax Ombudsman Ruth Owen has launched a review into the ATO’s debt recovery methods. Photo: Tax Ombudsman website
The Australian Taxation Office is under investigation over how it punitively chases unpaid tax debt using aggressive, non-transparent and inconsistent methods.
Tax Ombudsman Ruth Owen has launched a review of how the ATO manages the interest on unpaid tax debt and is seeking community input into the inquiry.
She is especially interested in looking at where taxpayers try to have their interest charges reduced or removed from their account when endeavouring to pay tax debts.
The General Interest Charge (GIC) is interest that accrues on a taxpayer’s outstanding debt with the ATO, but the law allows the tax office to remove GIC where certain criteria are met.
Ms Owen said the remission of debt interest charges was a “hot topic”, with her office receiving 134 complaints last financial year about the ATO’s approach.
“We’ve heard complaints about a general lack of consistency and transparency in the ATO’s approach to interest charges,” she said.
“Tax professionals and taxpayers have told us that it seems to be a matter of potluck as to who gets their interest reduced or remitted and who has to pay in full.”
The Tax Ombudsman noted the ATO’s publicly stated intention to take a stricter approach to debt collection and interest charge remission.
Her review will examine whether ATO policy, communications and guidance to staff and the public about how it considers GIC remission requests are clear.
It will also explore the reasoning behind the ATO’s recent decision to tighten up its remission of GIC and the intended outcomes.
Additionally, the review will examine whether remission decisions are fair and reasonable and if they are made consistently for taxpayers in like circumstances – regardless of whether they are represented or unrepresented – and individual circumstances are taken into account.
Other focuses of the review will be whether taxpayers are given adequate reasons not to remit their GIC, and whether there are opportunities to improve GIC remission systems and processes in light of the growing cost of impact on taxpayers.
Ms Owen said the effects of this shift by the ATO had been widely reported within the tax community and she is now encouraging members of the wider public to have their say.
“We know the ATO has reduced the number of cases in which it agrees to reduction or remission, and I think that requires further investigation as to why and what is fair and reasonable, when taking the taxpayer’s circumstances into account,” she said.
“With the current interest charge rate at around 11 per cent for unpaid debts, for some taxpayers the interest itself can very quickly become larger than the original debt.”
Without a reduction or remission in the interest, the Tax Ombudsman said, many taxpayers face growing debts that are beyond their means to pay back, even when they want to meet their obligations.
“Taxpayers have an obligation to pay their tax bills, and we know most people are trying to do the right thing, but there are certain circumstances where we think the ATO could take a more compassionate approach to debt collection,” Ms Owen said.
“There may be a range of factors that impact a taxpayer’s ability to pay their debt on time, and our current economic environment is contributing to financial stress in many households.”
Unlike many other decisions from the ATO, a decision to refuse to remit or reduce the GIC cannot be reviewed by the tribunal, making the Federal Court the only formal review forum.
This can be beyond the means or capacity of many taxpayers.
Making matters worse for taxpayers in debt, from this financial year, the GIC has become non-tax deductible.
That measure alone significantly increases the cost of repayment for small businesses and taxpayers already under financial pressure.
“Although the GIC is an important element of the tax system, to ensure that those who deliberately avoid paying tax are not given an unfair advantage, it should not punish those trying to do the right thing,” Ms Owen said.
“This issue can affect the livelihood of small businesses and taxpayers already doing it tough. I encourage anyone who’s been impacted by an interest charge remission decision to contribute to our review and help us thoroughly investigate the matter.”
Submissions and case studies are encouraged from individuals, tax professionals, community organisations, industry groups and other interested parties.
Examples of where the ATO has done well, and also those that highlight areas for improvement, are also welcome.
Submissions are open until 5 pm (AEDT) Friday, 10 October 2025, through the Tax Ombudsman’s website.
