The Australian Tax Office (ATO) has halted its pursuit of historical debts from tens of thousands of taxpayers.

In response to widespread criticism, the ATO has temporarily suspended a debt awareness campaign. 

Tax agents across the country have received letters regarding ‘on-hold’ client tax debts from previous years.

In a manner likened to the notorious robo-debt scandal, the ATO's initiative involved notifying tax agents and individuals about outstanding debts, ranging from small amounts to thousands of dollars. This caused distress to many of those targeted by the letters. 

The ATO acknowledged the negative impact of its actions, promising to review its communication methods for unpaid liabilities.

The ATO has issued a statement explaining the purpose of the letters, emphasising the need for transparency in individuals' existing debts with the ATO. 

The campaign was paused due to community feedback, with at least 28,000 letters sent to accountants and individual taxpayers.

While the ATO has confirmed the validity of the debts and says that taxpayers were previously informed when the debts were incurred, it acknowledged the importance of rebuilding trust in the tax system. 

Taxpayers do remain obligated to repay the debts, as the ATO is legally required to collect outstanding amounts.

Although the ATO lacks the authority to forgive or waive tax debts, it clarified that taxpayers are not required to take immediate action but can contact the ATO for advice on their debt status. 

The debts labelled as ‘on-hold’ indicate that the ATO is not actively pursuing recovery, yet they remain payable.

Independent MP Andrew Wilkie has expressed concern over the ATO's approach, comparing it to the robo-debt scandal and warning against similar tactics. 

“This is starting to look like a debt scandal all of their own,” he said. 

The ATO, facing a $50 billion debt book as of June 30, 2023, plans to address the issue in 2024. 

Second Commissioner Jeremy Hirschhorn has noted a behavioural shift among some small business operators regarding tax and super payments. 

The ATO’s recent annual report revealed an 89 per cent increase in the debt book over four years.

While net tax collections in 2022-23 increased to $576.2 billion, nearly 1.3 million “client engagement activities” contributed $7.7 billion to federal government coffers. 

The ATO has committed to reviewing its overall approach to communicating about debts on hold before taking any further action.