Lodge and Pay Working Group key messages 1 November 2023

Welcome

Members were welcomed to the new Lodge and Pay Working Group. No conflicts were declared. Members were advised the meeting will be recorded to assist with capturing accurate key messages. The recording will be destroyed after key messages are prepared and shared with members. Members had no objection to this.

Introduction

Anita Challen of the Lodge and Pay Program Hub provided an introduction of the Reset and the Program Hub.

The lodge and pay working group will help inform our understanding of issues and challenges regarding lodge and pay culture and develop an approach to engaging with agents and their clients, including:

• measures to shift to more positive payment habits and paying tax on time
• measures to reduce the unsustainable levels of debt
• communications to tax practitioners and the broader community
• support and guidance products for tax practitioners to use in conversations with clients for education and awareness of products and channels.

Lodge and pay reset

The Lodge and Pay Reset launched in June 2023 and reflects the ATO's firmer posture on debt in response to the rapidly growing debt book and declining payment culture.

Initially we are seeking to differentiate payment posture and expectations across the following key areas of focus:

• super guarantee
• refund fraud
• ATO initiated debts and audit programs
• aged higher value debt
• employers with new self-assessed debts.

The Reset was publicly launched at The Tax Institute’s Tax Summit, on 7 September 2023, and has been supplemented by:

• podcasts – TaxVibe and Tax on the couch
• speaking engagements
• media including radio interviews, press release and social media posts.

For clients who have not engaged with us and have ignored multiple contact attempts, we are using firmer action options:

• we disclosed around 10,000 entities to credit bureaus under our disclosure of business tax debts program
• our proactive media strategy has garnered widespread coverage

We have observed a significant increase in small business restructuring appointments.

We are sensitive to how that is tracking and working with those businesses on what the best practices are available to get viable businesses back on track.

Members provided feedback in relation to lodgment and payment and non-payment of debt habits including:

• Many clients are just coming out of COVID-19 impacts, some are thriving, and others are feeling the impacts now.
• Some people are reluctant to agree to a payment plan in fear of defaulting – particularly those with larger debts, which they would rather pay ad hoc.
• Nudges would be helpful to provide reassurance that payment plans are safe.

Some people struggle to fit into the ATO's idea of a payment plan and need the ability to talk to someone about options that are tailored to their individual circumstances, one which works for the client. That is not having set payments and set dates. These clients do not want to default.

Members were asked if the Reset work has had any impacts on those who have the funds, but choose not to pay?

• That population will not act on a letter. Agents want clients to survive, but despite best their efforts they cannot make clients pay if they don’t want to.
• There are agents who do everything for the client but cannot control the debt and don’t think it is worth the ATO coming to the agent about it, and there are agents who want to act like a mediator to get the client on track with debts. Most agents offer a service to keep clients aware of their debt. Engaging agents can only be helpful for both.
• People with bad payment history are not scared of defaulting as it’s easy to create a new payment plan. There appears to be no penalties for defaulting.
• Small businesses are generally running lean and are doing everything they can to pay.
• There is a proportion of people who have the money and will not engage with the ATO and do not engage with their paid advisors either. They, the clients do not anticipate the ATO to follow up with them.
• If they owe the ATO money, they likely owe money to others as well. In that situation, they will pay who is knocking on their door first, if the ATO is not proactive, they will not be on the top of the list.
• Those who haven’t contacted the ATO and are ignoring requests for payment are the people the ATO need to focus on as a priority.

External collection agencies

An update on the ATO’s planned recommencement of External Collection Agencies (ECAs) included:

• ECAs are another part of the ATO’s debt management approach that paused during COVID-19.
• ECAs will not undertake firmer and stronger activities such as garnishees, director penalty notices and disclosure to credit bureaus, however, reintroducing this workforce is expected to help re-prioritise ATO staff towards firmer and stronger actions.
• If a payment or payment plan isn’t agreed to, the debt will come back to the ATO to determine and undertake further action.
• Vulnerable and hardship clients will be referred to the ATO for management.
• A pre referral warning letter (PRWL) was discussed, and feedback provided. The plan is to issue these letters from November 2023, with the aim to issue approximately 100,000 by the end of January 2024.

Members comments

Due to identity fraud and scams, agents may be concerned and question the legitimacy about who they are talking to regarding client debts:

• a communication plan will be in place to make it clear that clients can call a number to verify
• agents can see debt amount to be able to verify debt amounts match up
• client agent preferencing will take place.

ECAs focus on new debts will send the wrong messaging to those who are avoiding paying debts. There will be noise about new debts being referred to ECA.

• ECAs focusing on newer debts will free ATO staff to re-focus on firmer action on aged and ballooned debts.

Agents suggested they are provided with:

• visibility of the pre-referral warning letter as preferencing doesn’t always come through. It was noted that lists showing clients who will receive a PRWL will not be available to agent. This will be investigated and confirmed to members.
• advanced notice via email or SMS that an ECA will be making contact regarding their client would be helpful.

Action items