The ATO’s 2025-26 annual report has just landed, and its figures chart the trajectory we've all been feeling. We are still very much in the eye of the storm, and nothing in this edition says it is passing soon. What follows is the detail, plus deep dives for brokers and advisors. It's our last edition for the year, so worth digging in.

The latest annual report shows that the debt book is bigger again. Collectable debt rose 14.6% to $62.2B, from $54.2B the year before. Some of that rise is the ATO moving older debt back into active collection, so it overstates the growth. On the ATO’s own like-for-like estimate, total debt rose 9.8%, from $115.0B to $126.3B. That is the cleaner number, and it is still a big rise.

Debt mix: Of the $126.3B, $62.2B is collectable, $26.8B is in dispute, $20.7B sits in insolvency and $16.7B is on hold.

Small business: Small business holds $68.3B, which is 54% of the total. About 44,500 small businesses hold $13.3B in debts that are 90+ days old and over $100K, with no engagement with the ATO.

Director Penalty Notices: The ATO issued 89,842, up 6.3%. It collected $1.5B so far against the notices issued, up 20.7%. Departure prohibition orders went from 14 to 82.

Interest remission: The ATO remitted $432M of interest, down from $1.4B, while the interest it applied rose to $9.7B. That is about 4.5% of interest applied, against about 17% the year before. Interest complaints from tax agents more than doubled, from 428 to 1,047.

Debt that was sitting in the background can come back to the surface. The ATO is moving older debt into active collection where it sees signs a client’s circumstances have improved. It is also now reporting all the debt it has put on hold, including debt that never showed on a client’s account, so this year’s on-hold figure can’t be compared with last year’s. This is actively in effect, so it’s worth checking what is sitting on a client’s ATO account now, so nothing surprises them.

Tax debt doesn’t exist in isolation. It sits downstream of a lot of pressure on businesses, and that pressure is building from both sides. The ATO’s collection campaign is firm and targeted: the debt book is growing, and garnishees, credit listings and DPNs are in regular use. At the same time, clients’ customers are paying later. Customers pay late first. Tax debt follows.

CreditorWatch’s September index shows payment behaviour getting worse across the board. Only 48% of invoices are paid on time, down from 58% a year ago, and the ABC reports that “serious arrears” are at their highest since April 2018.

Compared with a year ago, the share of invoices more than 60 days late has gone from 6% to 13% in construction, 5% to 11% in retail, 4% to 12% in transport, postal and warehousing, and 4% to 11% in manufacturing. Food and beverage services is the weakest sector in the data, at 19%.

And the pattern is a familiar one: late payment first, tax debt next. ATO tax defaults in effect are up 5,289 since January, and the 2,024 new ones in September were well above recent months. CreditorWatch’s CEO describes tax as often one of the first obligations to slip when cash tightens. We all know it happens. But that slide now comes with more consequences than it used to: GIC is 11.51% and no longer deductible, DPNs more than doubled in 2024-25 and rose again in 2025-26, and a debt over $100K that has sat overdue for 90 days without engagement can be disclosed to credit bureaus.

A client in one of those sectors, whose customers are paying late, is a client whose BAS and super are at risk, before the ATO has said a word. By the time a notice arrives, the cheaper options have usually been used up, and the expensive version of this story is the short-term loan taken to cover the quarter.

Ask clients in construction, transport, manufacturing, retail and hospitality how long their customers are taking to pay, before you ask about the ATO. Check BAS and super against cash. For brokers, a stretched debtor book is an early signal of a client heading for a working capital or tax conversation.

The GIC rate for October to December is 11.51%. It compounds daily and hasn't been deductible since July last year, so $100K of debt now costs about $12,200 a year once compounding is counted ($11,510 at the headline rate).

At the Tax Summit in September, Commissioner Heferen put the debt book at $115B at June 2025, with $54.2B collectable and about $9.7B of that GIC. He expected June 2026 to be higher, and he was right: the just released annual report puts total debt at $126.3B, with $62.2B collectable.

Tax Ombudsman Ruth Owen’s March review found that between 2019 and 2025, GIC balances grew 185%, against 94% for uncontested debt. Interest made up about 18% of the roughly $55B in uncontested tax debt, the Ombudsman’s measure at the time of the review, which is a different cut from the figures above. The debt book has grown since, and the interest keeps growing while a client works through a plan.

A business that pays every month and watches the balance barely move is trying hard. The interest is just moving faster.

Put a GIC figure beside each client's debt. For brokers, the debt can be funded in full, interest included, while a plan protects the deal.

Plenty of your clients are on a payment plan. Not all of them are on a good one. A plan eases the pressure, but it doesn't stop the interest, and a plan the business can't hold is just a delay. Our sequence is a sustainable plan first, to protect the client, then remission once it is holding. Renegotiating plans that were never built to fit is the biggest trend we’re seeing across new case files.

One point worth sitting with in the annual report is remission, where the ATO reduces or cancels interest. In 2024-25, the ATO remitted about 17% of the total interest it had charged taxpayers. In 2025-26, that fell to about 4.5%. In the same period, total interest payable rose to $9.7B, compared with $7.9B in the previous financial year. In real terms, the total amount remitted dropped to $432M from $1.4B in 2024-25. Remission is how GIC gets reduced, so for clients carrying it, that is a lot less relief granted.

The ATO says it can remit interest where this is fair and reasonable, and it has agreed to all the recommendations in the Ombudsman’s March review of GIC remission. The annual report doesn’t say why remissions fell, though it does show interest complaints from tax agents more than doubling, from 428 to 1,047. In our experience, who negotiates on your behalf is more often a deciding factor than not. A well-evidenced request, made once the plan is holding, has the best chance, and that is the work of a tax debt negotiation specialist. 

The ATO is hearing about rigid plan terms too. Its practitioner working group raised them back in July, and Michael Moon makes the case for plans built around the real cash cycle in his October Access News column, which you can read here.

Ask three questions of every client on a plan. Was it built around the business, not a template? Can the business hold it through its slowest month? Does it still fit, with nothing changed since it was set up, such as Payday Super, slower-paying customers or higher costs? If any answer is no, now is a great time to renegotiate, and sooner beats later.

This is what we do. We negotiate for a plan that fits the business and the best terms we can get, and we'll renegotiate a plan that was never built to fit.

Tax Ombudsman Ruth Owen opened a review of how the ATO runs DPNs on 1 September, after the number of notices more than doubled in 2024-25. She wants to know whether directors get enough information early enough, whether the ATO takes their circumstances into account (including statutory defences and coerced directorships), and whether the safeguards hold. Consultation has closed and the report is due in April 2027. The ATO's annual report shows no slowdown in the meantime: 89,842 DPNs were issued in 2025-26, up another 6.3%.

Any review is welcome, but we can't see a material change for the clients you have struggling with tax debt today. Its focus is how DPNs are used, and any possible misuse, not how they are applied as a whole. A director who gets a DPN today has the same 21 days as last year, and nothing pauses while the report is written. Keep it in proportion, too: the Ombudsman found the ATO's actions reasonable in 67% of debt collection complaints between July 2025 and April 2026.

Screen the client list for overdue PAYG withholding, GST and super, the debts that can become personal, and check director details on ASIC, because notices go to the address on record. For brokers, a director with unlodged or unpaid BAS is an early flag on a deal.

The ATO announced on 1 October that it would stop accepting credit cards after 30 November. On 9 October the Treasurer funded the ATO to keep accepting them until 30 June 2027. After that, cards will still work through third-party providers, alongside debit cards and bank transfers. About 2.3% of tax payments were made by card in 2024-25, and the ATO says about 5% of small businesses used one.

The delay eases this year-end, but the direction hasn't changed. Payday Super took the quarterly super float, and the card float now has an end date. With GIC at 11.51% and no deduction, letting the BAS slide is no longer the option it was.

Check what clients paying BAS or a plan by card have been told, since earlier ATO messaging said 30 November. Use the extra months to build the cash buffer the card used to provide. For brokers, a client leaning on a card to meet tax is telling you about cash flow, which makes it a working capital conversation.

Our view as tax debt negotiators is that we expect a new spike in tax debt negotiation matters coming into year-end and the new year. The earlier the conversation, the more options remain, and the right specialist at the right time changes the outcome.

Insolvencies are not the same as tax debt, but they show how much pressure the wider market is under, and tax debt follows that pressure. First-time insolvencies peaked in the December quarter of FY26, at 3,856. The full year was slightly lower than FY25, at 14,152 against 14,722, but CreditorWatch’s CEO has told the ABC that more insolvencies could come next year. Monthly counts are lumpy, so we are watching the quarter. Confidence is high on the timing and moderate on the size.

The thing that would change our view is trade payment defaults easing. They aren’t: up 26.1% on the year, with CreditorWatch’s seasonally adjusted index at 196 against a February 2020 base of 100.

The Payday Super fallout arrives as notices between about January and mid-2027. In our Advisor Insights series, Olga Koskie spoke with Michael Buscema from Aptum, who spent almost 12 years at the ATO. He expects director penalty notices around six months in, if not sooner, reaching back to the start of the regime. Against that, the ATO's first-year approach runs to 30 June 2027 and is supportive of employers who are trying to comply. Confidence is medium. We would move our range earlier if the ATO signals it is issuing notices early.

Collections stay firm and targeted. The ATO accepted the ANAO's recommendation to set a target to reduce small business debt, and firmer actions were a small share of small business collection interactions in 2024-25, lower than the 1.2% of 2018-19. Expect steady pressure with no blanket escalation. Confidence is high.

In the meantime, super is where to look first. If any part of a client's debt is super, the ATO prioritises collecting all of it, and the time you get for a plan is shorter.

Some of your clients are carrying ATO debt they haven't told you about. Four questions, about a minute on the phone, tell you where each one sits.

1. Is there existing ATO debt? No: nothing more to do. Yes: next question.

2. Are they in a payment plan? No: refer now. Yes: next question.

3. Is the plan sustainable? Yes: keep watching. No: it needs renegotiating.

4. Any DPNs, garnishee notices or credit listings? Yes: urgent, get a specialist in immediately. No: keep monitoring.

Since interest stopped being deductible, a lot of the conversation has turned to financing the debt away. Financing is part of the answer and never the whole of it. The payment plan, the ATO relationship and the client's cash flow still need handling, and that's the case for working in parallel: the funding and the plan side by side, or the plan going in first so the deal can proceed.

Even once it's a crisis you can still be at the table, but every stage earlier beats the one after it. Bringing in a specialist keeps the client with you.

We’re finalising our latest broker guide covering the situations we see most. Want a copy? Get in touch with our team and we’ll send it through once it’s done.

Olga Koskie, CEO and Director, Tax Assure, on the tax debt myths we hear most, and what holds up when you deal with the ATO.

I hear the same tax debt myths all the time, and most of them come from old mate at the pub rather than a reliable source. It genuinely doesn't help what's already a tricky area for advisors and businesses. So I just wanted to put together some of the most common offenders.

We recently ran our first Pub Talk event in Melbourne, with more than 100 advisors in the room for the latest on ATO enforcement and a few of these myths busted live. Want to come to the next one? Email the team and we’ll add you to the invite list.

• An Ex-ATO Lawyer explains What Happens When You Get A DPN with Olga Koskie and Michael Buscema. Watch it now »

• ATO Debt, Cash Flow & Why Your Bookkeeper May See the Warning Signs First with Michael Moon and Sarah Raad. Watch it now »

• ATO Interest Remission: What Actually Gets a "Yes"? with Michael Moon and David Bushby Watch it now »

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Need to discuss a case? Book a consultation with Tax Assure or call 1300 952 295. Initial consults are obligation free, and we love working with other specialists to get the right outcome for clients.

About Tax Assure: Australia’s leading tax debt negotiation firm. We handle the highest volume of cases and run a specialist team to ensure the best outcomes for clients. Tax Assure works on an assessment and engagement fee followed by a success fee, calculated only on the GIC and penalties actually remitted. Initial consults are obligation free.

^{Disclaimer: The information in this newsletter is general in nature and does not take your personal circumstances into account. It is not financial, tax or legal advice. Before making decisions about a tax debt, speak with a qualified tax professional or advisor, or contact Tax Assure to discuss your situation.}