The Australian Financial Review has reported that money owed to the Australian Taxation Office (ATO) by bankrupt individuals and insolvent companies has rocketed by 20% to nearly $5 billion over the last year, with concerns that the ATO's new strict debt recovery and economic uncertainty may push more taxpayers into the red.

 

The AFR report notes, however, that ATO has found an increased margin between debt considered collectable and debt considered insolvent continues to grow, with the headline debt, which peaked during the financial crisis, shrinking by 1.8 per cent over the last year to $27 billion.

 

The ATO has also firmed up its stance towards individual tax debt, executing harsher financial reprisals on those who default on payment arrangements multiple times while offering 'flexible payment arrangements and penalty and interest remissions' on those with legitimate taxation problems.

 

The ATO's tougher stance comes after its more lenient approach during the financial crisis which saw some 113,000 payment arrangements entered and $38 million in tax debt partially or fully forgiven.

 

Insolvency figures have shown that nearly 800 companies per month have collapsed on average for the 2010/2011 financial year.