Highlights

  • The ATO expects large businesses and wealthy private groups to pay disputed debts in full or enter 50:50 arrangements.
  • PS LA 2011/4 is ATO guidance telling staff how to recover disputed debts, and it does not change appeal rights.
  • The general interest charge, recently reported at 11.51%, compounds daily during a dispute and is no longer tax-deductible.
  • In Zhang, the Full Federal Court upheld a garnishee that took $391,735.78 from a term deposit towards a disputed debt.

Thirteen days after its 15 October 2026 bulletin, the ATO fronts Senate Estimates on Wednesday 28 October, where debt collection and disputes may be raised. The bulletin's message is blunt: lodging an objection does not pause the bill. Large businesses and privately owned and wealthy groups that contest an assessment are expected to pay in full, or at least half under a "50:50 arrangement", while the dispute runs. With interest compounding daily, the choice can be worth hundreds of thousands of dollars.

What the ATO has said

The business bulletin said large businesses and privately owned and wealthy taxpayers with a disputed debt are expected to "pay their debt in full or enter into a 50:50 arrangement". The expectation sits in practice statement PS LA 2011/4, Collection and recovery of disputed debts. The ATO said it will engage more actively with these groups and encourages early contact.

A practice statement is guidance, not legislation. It tells ATO staff how to handle recovery and leaves taxpayers' rights to object or appeal unchanged.

How a 50:50 arrangement works

Under tax law, lodging an objection or appeal does not change when tax is due. In a 50:50 arrangement the taxpayer pays half of the disputed amount, and the ATO generally agrees not to pursue recovery on the other half until the dispute is resolved.

GIC generally keeps running, so the debt can grow. A loser owes the balance plus interest, while a winner generally gets amounts paid refunded. The arrangement is not automatic: the ATO considers each case, and where there is a "heightened risk to revenue" it may take recovery action before the dispute is finalised.

The cost of waiting

Say a private group receives an amended assessment for $2 million in primary tax, objects, and loses after two years. Paying nothing, with GIC at 11.51% compounding daily and the rate unchanged, adds about $517,612. Under a 50:50 arrangement it pays $1 million upfront, and GIC accrues only on the unpaid $1 million, adding about $258,806, half as much.

Neither amount is deductible for income years starting on or after 1 July 2025. Had the group won, it would generally have its $1 million refunded with interest. Figures are illustrative, with penalties ignored.

Why the ATO is pressing the point

Commissioner Rob Heferen said in September that collectable debt, last reported at $115 billion in June 2025, was expected to have grown. His message: "Where debt is collectable, we will continue to take firmer actions." Penalties or interest were reduced or remitted in only 5% of Ombudsman complaint cases, down from 17%.

The stakes are large: the ATO settled 30 disputes for $1.31 billion of tax in 2025–26 and has 129 current audits of public and multinational businesses. In Zhang v Commissioner of Taxation [2026] FCAFC 137, the Full Federal Court dismissed an appeal over a garnishee notice that took $391,735.78 from an HSBC term deposit towards a debt of more than $2.5 million from a 2016 amended assessment. The court found "no arguable case of misconduct". The case did not turn on PS LA 2011/4, but it shows a disputed debt can still be collected.

The dispute process in brief

An objection is generally lodged within two years of the assessment for individuals and small businesses with simple affairs, and four years for most others. If it is disallowed, the taxpayer can generally seek review in the Administrative Review Tribunal or appeal to the Federal Court. Small businesses with a matter in the Tribunal's small business taxation division can generally apply to pause ATO recovery action.

What to watch

The 2025–26 annual report is expected to update the $115 billion figure, and the GIC rate resets each quarter. The Ombudsman's director penalty notice review is due in April 2027. Watch whether the restated expectation brings more 50:50 arrangements or early settlements.