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A federal government plan to unwind a “callous” tax campaign designed to extract historical debts does not go far enough and should include compensation for those who were unfairly pressured into making payments, critics of the scheme say.
The Australian Taxation Office program dubbed “robotax” was designed to raise as much as $15.2bn by pursuing an assortment of debts – many of which were inadvertently accrued decades ago and had been hidden from taxpayers.
Budget papers show the government intends to amend laws to allow the ATO commissioner to keep debts put on hold before 2017 on ice indefinitely, rather than extract them from tax refunds as was planned.
Robotax was paused recently amid a rising number of complaints and public scrutiny. The lack of transparency over how historical debts were accrued has been a common complaint. Some are so old they are almost impossible to challenge and exceed the five-year retention period most taxpayers are required to keep records.
The federal MP Andrew Wilkie said it was good to see some action from the government on the “robotax fiasco”. But he told Guardian Australia it was not the same as ending the scheme by legislating time limits on the pursuit of old debts.
“What’s more, the real scandal is not the re-emergence of the debts themselves, but the way the ATO has acted with callous disregard in their communications about the debts and failed to provide for any real option for people to seek more information,” Wilkie said.
“There is also the matter of the people who have felt pressured and have paid already. The government will need to work out a way to compensate these people if that is what is needed to ensure fairness.”
The ATO apologised last year for the “unnecessary distress” it caused by sending hundreds of thousands of boilerplate letters to tell recipients they had outstanding debts, with no detail about how they were accrued.
While the “on-hold” debts weren’t immediately due and were flagged to be taken from future refunds, many people felt pressured into paying. Guardian Australia documented the case of a 78-year-old retired teacher who paid after weeks of what he described as “misinformation, obfuscation and sleepless nights”.
The debts were often linked to old business activity statements, GST payments, PAYG instalments and non-lodgement fines. None of that information was in the correspondence.
New internal government documents released to Guardian Australia show there was $15.2bn worth of on-hold debts in March.
About $8.3bn of that amount, owed by 1.3 million taxpayers, was related to historical debts placed on hold before 2017. They are the most contentious debts which the ATO commissioner would be able to indefinitely ignore if the proposed laws were enacted.
The documents, released under freedom of information laws, show that the government blames the ATO for the way the program was run.
Documents from the office of the finance minister, Katy Gallagher, state: “It’s fair to say that we have raised concerns about how transparent the ATO has been. Allowing debts to remain hidden for years has led to this issue.”
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The government also denies the scheme resembles robodebt – despite public comparisons to the flawed compliance program that shifted the onus of proof on to people to disprove they owe debts they were often unaware had accrued.
“While I have concerns about how the ATO has administered these debts on hold, this isn’t anything like the Liberal government’s illegal and unethical robodebt scheme,” the government documents state.
A Treasury spokesperson said the ATO would continue to pause the offsetting of debts placed on hold before 2017 until the new measure became law.
It is not clear if the ATO would use the new powers to permanently ignore the pre-2017 debts or assess them on a case-by-case basis.
The ATO referred Guardian Australia to its website where it provides similar information.
Senator Nick McKim, the Greens spokesperson for economic justice, said the new laws should provide the ATO with broad discretion to not pursue “questionable debts”.
“People should not be disadvantaged because they felt pressured into accepting the debts,” McKim said.
“The ATO should also review all debts that were accepted after the robotax letters were sent last year. If the legislation does not provide for this, it should.”