There will be a comeback for income tax offsets in 2022

For Income Tax Offsets Beware – inactive amounts owed by taxpayers will be deducted from credits, starting in June 2022.

Debts on hold will again to be used to offset tax refunds or credits starting this month, the ATO has confirmed.

The ATO has already commenced sending letters to taxpayers reminding those with aged debts of their liability.

The ATO defined aged debt as an uneconomical non-pursued debt that it has placed on hold and taken no recent action to collect.

From June 2022, the ATO will recommence offsetting clients’ tax refunds or credits to pay off their debts-on-hold.

The ATO has said debts were typically placed on hold because it was uneconomical to undertake collection activity. They did not appear as outstanding balances, but taxpayers were notified by letter that the office had paused debt collection.

Behind the scenes, the debt remained on the taxpayer’s record and General Interest Charges may apply automatically. Such debts on hold could also be re-raised later if the taxpayer became entitled to credits. The taxpayer would be notified, and the offset would appear on their statement of account.

The ATO would also re-raise debts if the taxpayer’s situation has changed and they have reason to believe that you are now able to pay the debt.

If you are concerned about any old debts, please contact our office immediately!