Aggressive ATO debt chase driving insolvency bump: CBA

afr.com:

The Australian Taxation Office is driving a bump in insolvencies and corporate stress as it chases $30 billion in debt from small and medium businesses, Commonwealth Bank executive Michael Vacy-Lyle says.

Mr Vacy-Lyle, who heads CBA’s business banking division, told The Australian Financial Review that “without a doubt” stress was increasing among his smaller clients as cost-of-living pressures slowed consumer spending.

“The long and the short of it is that people need to pay their taxes,” Mr Vacy-Lyle said. Eamon Gallagher

Spending by Australians fell 8 per cent year-on-year in the first week of this month, ANZ data released on Thursday showed.

Insolvency numbers were on the rise, he said, but the ATO was also putting small companies out of business as it pursued debts with renewed aggression after the COVID-19 pandemic.

“You will recall during COVID-19, the ATO was very soft on tax collections and there is about [a] $30 billion number that consistently gets quoted about small businesses owing the ATO,” Mr Vacy-Lyle said. “The ATO has now gone a lot harder in collecting that money and is putting businesses into receivership on the back of them not paying. That is driving some of the increases in receivership.”

The comments come after CBA reported a record $10.2 billion cash profit for the 2023 financial year, to which the business bank contributed nearly $4 billion. Business bank profits rose 32 per cent compared to the previous year and Mr Vacy-Lyle said it was “inevitable” CBA would become the biggest business bank in Australia.

“The long and the short of it is that people need to pay their taxes,” he said. “The ATO was incredibly patient during COVID-19. The easiest way for an accountant to advise a business on how