The ATO and Financial Hardship Get back in control of your debts

Financial Hardship Policy

It’s not uncommon for people who are experiencing financial hardship to owe money to the Australian Tax Office.  Our company, Just Budget Pty Ltd deals with many different credit providers when helping people to set up and manage payment plans that represent their current financial circumstances.

While we find the majority of creditors to be fair and responsible when dealing with matters of financial hardship, unfortunately in many cases the same cannot be said for the ATO.

The ATO does have a financial hardship area although it’s unclear what their policy actually is when dealing with such matters.  I say this because we often seem to receive different outcomes for similar situations.  Resolving a financial hardship issue for clients often seems more to do with the person at the other end of the phone rather than clear policy.  I have spoken to a number of people within the ATO about this and am yet to receive a clear explanation of how they treat matters of hardship.  What is clear is their approach seems inconsistent at best and often the so called resolutions we receive make little sense for tax payers or the ATO.

ATO Financial Hardship Example

In one recent example Just Budget presented a financial hardship submission to the ATO.  This submission was quite detailed and included an explanation of why our client was struggling financially, a comprehensive budget and a proposed payment plan to retire the debt over time.  In short our client acknowledged the debt and wanted to pay it back in accordance to her financial capacity.  One would think that upon reviewing this information the commercial decision would be for the ATO to accept this proposal and see their debt paid off in full over time.

After a number of months we received a letter of decline from the ATO.  What really took me by surprise was a section in their letter that listed “other options” for the client, these were:

  • To increase the amount of the proposed payments
  • To make a lump sum payment

Given our submission clearly detailed our clients financial position and the repayment offer represented the most our client was able to offer at this stage there seems little point in the ATO asking for more given this was clearly not possible.  One wonders if the ATO even read the information provided.

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ATO Effectively Forced Client into Insolvency

It was also pointed out to the ATO that this client had little in the way of savings or assets and this was a genuine attempt to retire the debt in full.  With this in mind, one would think such an offer would have been met with open arms however instead, the ATO said they would be commencing legal action against the client, effectively forcing them into insolvency.

Such an attitude by the ATO seems cruel and unnecessary and one questions the motivation.  Would they prefer to force someone into insolvency than enter into a realistic plan to retire what is owed?

Financial Hardship Ignored by the ATO

This type of attitude can be highly destructive as giving people no option but to file for bankruptcy has the potential to not only ruin lives, but also breakup families and place further burden on an already strained welfare system.

In my opinion many such cases would be avoidable if the ATO adopted a more commercial and human view on matters of genuine financial hardship.

John Dickinson

Just Budget Pty Ltd

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