The 2021-2022 federal budget contained a raft of key budget measures designed to provide relief to businesses still struggling in light of the COVID-19 pandemic. In conjunction with changes designed to simplify Australia’s insolvency laws, Treasurer Josh Frydenberg announced increased powers for the Administrative Appeals Tribunal (AAT) in relation to small business taxation decisions.

The Government announced it will be extending the power of the AAT by allowing them to pause or modify any ATO debt recovery action relating to disputed debts, that are being reviewed by the Small Business Taxation Division (SBTD) of the AAT. This measure will provide an avenue for small businesses to ensure they are not required to start paying the disputed debt until the matter has been determined by the AAT.

Under the new powers, when a small business files an application in the SBTD, they will be able to apply for a pause or modification of the ATO’s action until that dispute has been decided by the AAT. This applies to small businesses that have an aggregated turnover of less than $10 million, who have been affected by a small business taxation decision.

Currently small business owners are only able to pause or modify an action by going through the courts. Using the court system can be a costly process, with the uncertainty that they may not be granted the desired pause or modification. Often, business owners will have to wait as long as 60 days for a decision, while occurring significant expenses.

The SBTD of the AAT will now be able to pause orders such as garnishee notices, which allow a creditor to seek payment of debt from a third party like their bank, or the recovery of general interest charges and penalties.

These changes come after the Australian Small Business and Family Enterprise Ombudsman put forward a recommendation in 2019 calling for these legislative amendments. It also follows the ATO’s decision to turn its small business independent review service into a permanent offering.

Australia will now become closer to the UK and US tax systems, where debt collection by government agencies is unavailable until all legal avenues of appeal have been exhausted.

These new powers will be available in respect to proceedings commenced on, or after, the date of Royal Assent of the legislation.