Debts on hold are amounts that the Australian Taxation Office (ATO) has decided are uneconomic to pursue. These amounts are not included in either the taxpayers’ account statement or the receivables amount in the ATO’s financial accounts. The Inspector-General of Taxation and Taxation Ombudsman observed that debts on hold “represent liabilities which are due and payable and are not the subject of any objection or appeal and not the subject of an insolvency action, so both are technically recoverable and of equal relevance to the public and the Australian Parliament.”

The ATO does not actively pursue debts on hold but does have policies which can result in potential refunds or credits being used to offset the debt on hold. In late 2023, the ATO commenced writing letters to taxpayers advising them that they had debts on hold, some of which could have been decades old. Community concern about this approach lead to the ATO announcing that it would not take action to recover debts placed on hold prior to 2017. 

Pre 1 January 2017 debts on hold

In the 2024/25 budget the government announced that the ATO will be given the discretion to not offset debts that were placed on hold before 1 January 2017 against future refunds for individuals, small business and not-for-profit entities. This announcement has not been enacted, and it is unclear how the ATO will exercise this discretion. The quantum of the pre-1 January 2017 debts on hold are also unknown.

Post 1 January 2017 debts on hold

Debts put on hold post 1 January 2017, which on CA ANZ’s calculation amount to approximately $10 billion, are being added to taxpayers account statement over the course of this calendar year. This is so taxpayers can have visibility over these amounts and won’t be surprised when a refund is used to offset these debts. 

General interest charge (GIC) which has been previously added to these debts on hold will be automatically remitted by the ATO as the taxpayer did not have visibility of the debt. However, going forward 6 months after the debts on hold are added to a taxpayer account the debt will be subject to GIC – which is currently 10.78% and non-deductible.

Taxpayers will be advised of this by letter if the amount is more than $100.  But if the debt on hold is less than $100 then unless a taxpayer is prompted to check their account, they may be in for a nasty surprise. 

Taxpayers are seeing a surge of $10 billion in tax debt added to their accounts. Vigilance is needed to avoid being caught off guard by unexpected interest charges. Stay informed, check your account regularly, and take action early to avoid costly surprises

Tax practitioners will not be receiving a report from the ATO about which clients have post 1 January 2017 debts on hold added to their account or how much or when. To determine this:

• tax practitioners will need to check their correspondence for those who have had more than $100 added to their account
• if a tax practitioner wants to protect their clients who have had less than $100 added to their account, then they will need to undertake a process that involves at least 12-steps for each account for a client to find this out.  

With tax practitioners having an average of 552 clients this is a huge administrative burden. This process must be easier if the ATO is serious about collecting these debts. After CA ANZ raised concerns about the lack of notification, the ATO confirmed that messaging in ATO online services will alert taxpayers and agents when debts on hold are included in account balances, and there is no value threshold for these notifications. Still, with the debts on hold only just beginning to be added to accounts and being expected to be completed by the end of this year, it is hoped that an easier process can be found by February 2026 to allow tax agents to assist clients to repay small amounts of debt on hold before GIC applies. 

The ATO won’t be contacting taxpayers to pay amounts that are ‘debts on hold’ but they will continue to be offset against refunds and credits owed to taxpayers. Taxpayers with existing payment plans will need to renegotiate their payment plan when debts on hold are added to account balances. To avoid payment plans defaulting, the ATO have said they will contact taxpayers who are paying their tax debts to discuss options. After 6 months when GIC applies to debts on hold added to account balances, the taxpayers will need to follow the ordinary GIC remission process.