News & Politics

New ATO debt campaign has some seniors anxious about sudden repayment demands

• By Danielle F.
• Today at 2:16 PM

Seniors living off fixed incomes may encounter financial distress due to an unexpected collector. Image Credit: Pexels/Mikhail Nilov

The letter arrived on a Tuesday morning, demanding $2,590.33 within seven days.

For 55-year-old Suzanne, whose unemployment benefits aren’t enough to make ends meet, it felt like the final blow.

She’d been faithfully making weekly payments to the Australian Taxation Office (ATO) for her tax debt, yet somehow found herself handed over to a private debt collector with an ultimatum that sent her into panic.

Suzanne wasn’t alone—she was one of more than 355,000 Australians the ATO has referred to private debt collectors since January 2024 as part of an unprecedented crackdown on the nation’s $50 billion in outstanding tax debt.

The $42 million collection machine

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The ATO awarded private debt collector Recoveriescorp more than $42 million in contracts to address the debt crisis.

The reality has far exceeded initial projections—the expectation was between 100,000 and 150,000 referrals for the entire 2024 financial year [5], yet that figure was smashed in just the first few months.

Small businesses account for almost two-thirds of this debt. However, individual taxpayers, including welfare recipients and retirees, are being targeted by this intensified collection effort.

How do you end up with a debt collector?

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The process seems straightforward on paper. If you have an overdue debt and don’t respond to the ATO’s request to pay, they may send you a pre-referral warning letter.

If taxpayers haven’t responded to the pre-referral warning letter or engaged with the ATO to repay their debt, they are likely to be referred to Recoveriescorp.

Yet, Suzanne’s case illustrated how the system can fail people who are genuinely trying to meet their obligations.

Despite making regular payments and reporting her hardship to ATO staff ‘on several occasions’, she was still referred to a debt collector, even though such referrals are supposedly ‘usually reserved for unresponsive taxpayers, not those making weekly repayments’.

Recoveriescorp is a Melbourne-based firm focused on financial services. Image Credit: Recoveriescorp

The interest trap

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What makes tax debt particularly punishing is the compound interest.

If you don’t pay on time, the ATO automatically adds a general interest charge to what you owe. Your debt will grow each day your debt remains unpaid, with interest calculated on a daily compounding basis.

Overdue debts incur the general interest charge, currently set at the highest level in more than a decade, with an annual rate of 11.38 per cent.

For someone struggling to make ends meet, this can quickly turn a manageable debt into an overwhelming burden.

Debt collection practices can be particularly devastating for seniors. Many are on fixed incomes, may have health issues that affect their ability to earn, or are managing the transition from work to retirement.

Those approaching or in retirement often face complex financial transitions—selling the family home, managing superannuation drawdowns, or dealing with reduced income.

A tax bill that might have been manageable during peak earning years can become overwhelming when living on the age pension or modest superannuation income.

The seven-day ultimatum

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If your debt has been referred to Recoveriescorp, they will contact you to request payment by phone call, email, a text message or letter.

These ‘final notice’ letters give recipients just seven days to pay in full or face potential legal action. For someone already struggling financially, this tight deadline can trigger panic and poor decision-making.

Despite the intimidating letters, know your rights when it comes to debt collection.

Debt collectors may only contact you by phone Monday to Friday, 7:30 am to 9:00 pm. On weekends, they may only contact you from 9:00 am to 9:00 pm.

Guidelines recommend not exceeding three contacts a week, or 10 per month. If you let them know you don’t want to be contacted and would prefer postal or email communication, they’re obliged to respect your request.

You also have the right to ask Recoveriescorp to provide proof of the debt. If the matter is disputed and you advise them not to contact you again, they are not permitted to keep sending demands.

The ATO has ‘gone into overdrive’ to collect debts, particularly from small businesses, resulting in a surge in court-initiated windings-up, but it has also prompted more directors to take action to save their businesses.

This intensified approach reflects the government’s determination to address the debt crisis, but consumer advocates argue the human cost is significant, particularly for vulnerable groups like seniors, people with disabilities, and those experiencing financial hardship.

When you owe tax which you can’t pay by the due date, contact the ATO before the due date so they can help you while it’s still manageable.

If you’ve already been referred to Recoveriescorp, you can call them on 1300 323 495, but remember to verify it’s really them first. Many people find it helpful to seek assistance from free financial counselling services, which can help negotiate payment plans and understand their options.

Have you or someone you know been contacted by a debt collector about tax debts? We’d love to hear about your experience and any advice you might have for fellow members navigating this challenging situation.

Primary source

When tax debt collectors come knocking: The human cost of Australia’s $50 billion problem | YourLifeChoices

Cited text: ‘What Suzanne didn’t know was that she’d become one of more than 355,000 Australians the Australian Taxation Office has handed over to private debt col...’

Excerpt: Suzanne wasn’t alone—she was one of more than 355,000 Australians the ATO has referred to private debt collectors since January 2024 as part of an unprecedented crackdown on the nation’s $50 billion in outstanding tax debt.

Australian Taxation Office Debt Collection Trends and Policies in 2024—Rodgers Reidy

Cited text: ‘At the end of January 2024, the ATO reported that collectible debts had surpassed $50 billion.’

Excerpt: Suzanne wasn’t alone—she was one of more than 355,000 Australians the ATO has referred to private debt collectors since January 2024 as part of an unprecedented crackdown on the nation’s $50 billion in outstanding tax debt.

ATO to sool debt collector on 150,000 taxpayers | Accountants Daily

Cited text: “External debt collection agency Recoveriescorp will assist the ATO with addressing the increase in tax and super debt and allow us to engage with mor...’

Excerpt: The ATO awarded private debt collector Recoveriescorp more than $42 million in contracts to address the debt crisis.

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