Key Highlights

  • Tax Ombudsman Ruth Owen says some ATO treatment of people who owe tax isn't fair and reasonable.
  • The ATO has agreed to all of the Ombudsman's recommendations on the general interest charge.
  • Penalty and interest complaints rose from 13% to 18% of all complaints.
  • Debt collection and payment matters each made up about a fifth of investigations.

Australia's Tax Ombudsman has put fresh pressure on the ATO over how it treats people who owe tax. In an interview published on 4 November, Ruth Owen said she sometimes sees treatment that "isn't fair and reasonable". She also said the ATO has agreed to all of her recommendations on managing the general interest charge, with implementation now being discussed. For anyone on a payment plan watching interest pile up, that matters.

The comments come as tax bills from 2025–26 returns fall due, and as the interest charge on unpaid tax is no longer tax-deductible.

What the Ombudsman said

In an interview, Ms Owen said: "I sometimes see that the way they treat people who are owing tax isn't fair and reasonable."

She raised concerns about how the ATO collects Debt and applies interest, saying interest is often making the amount due "impossible to pay back". She also questioned whether the ATO is taking enough account of businesses' economic difficulties and people's individual circumstances.

In earlier comments reported by the same source on 28 October, she said: "I definitely recognise that they must collect debt, but I question how they go about it."

Her comments echo concerns from practitioners. In the industry's own ATO Sentiment Report, nearly nine in 10 accountants surveyed said the ATO had become more aggressive in enforcement and compliance, and 70% said clients had been contacted by the ATO about debt recovery.

Ms Owen told reporters she would like the ATO to focus first on helping people get back on track with their future obligations, then take a reasonable approach to historical debt.

The interest charge review the ATO agreed to

The recommendations she referred to come from her office's review of the ATO's management of remission of the general interest charge, released on 2 March 2026.

The Tax Ombudsman's office said the ATO "has agreed to all" of the review's recommendations. Its published summary describes two main ones.

  • The ATO should agree to up-front, interest-free payment plans for eligible taxpayers who enter, and keep to, compliant payment plans, so interest stops accruing while they repay.
  • The ATO should test the impact of its recent improvements after 12 months.

The office also said that during the review the ATO extended its reconsideration criteria and improved its guidance for taxpayers and tax practitioners.

At the time, Ms Owen said: "The ATO's decision-making isn't meeting community expectations." She added: "Interest can make small debts grow to unaffordable levels very quickly."

These are recommendations the ATO has accepted, not changes to the law. Interest-free plans would rely on the ATO's existing power to remit interest, and timing and eligibility details have not been published.

What the review found

The review found that inconsistent decision-making, vague guidance and poor communication had contributed to confusion and unfair outcomes.

It noted that the law requires the interest charge to apply and compound daily, even while a taxpayer is repaying under an approved plan. That, the office said, can make debts grow beyond what a taxpayer can pay.

It also found the ATO tightened its approach to remission in 2023 and did not communicate the change well. ATO letters did not always fully explain why a request was refused or what Options people had to disagree.

The Ombudsman's office received 134 complaints about the interest charge in 2024–25. Ms Owen said then: "For many, the only formal dispute option is the Federal Court."

Hypothetical example: how daily compounding adds up

The figures below are hypothetical. The general interest charge is set each quarter and moves with short-term interest rates, so the 11% annual rate used here is for illustration only.

Imagine a $10,000 tax debt left unpaid for a year, with interest compounding daily at 11% a year. After 12 months, the balance would be about $11,163, meaning roughly $1,163 of interest.

Left for a second year, the balance would grow to about $12,460. Interest alone would then be close to $2,460, or almost a quarter of the original debt.

Payment plans reduce the balance over time, so real figures would usually be lower. But interest keeps accruing on whatever is outstanding, which is the problem the review's interest-free plan recommendation is aimed at.

Since 1 July 2025, the general interest charge has also not been deductible, which means the full cost falls on the taxpayer.

The complaints picture

The comments came with the Ombudsman's latest complaints insights report, covering April to September 2026.

Reports said that debt collection and payment matters each made up about a fifth of investigations. The share of debt-related complaints where the Ombudsman found the ATO had acted reasonably fell by "nine per cent" on the same period a year earlier, to 63%. The reported wording does not make clear whether that is a fall of percentage points or a relative fall.

Penalty and interest complaints rose from 13% to 18% of all complaints, Reports said on 28 October, and more than three-quarters of those concerned the interest charge.

Ms Owen also noted the limits of her role. Her office can identify errors and recommend changes, but cannot force the ATO to act. She also pointed to cases where the ATO cannot help: "There's no point putting forward a request for a release of tax debt where we know that ATO doesn't have legislative power," she said, referring to the Superannuation guarantee charge.

She said complaints could keep rising over the next 12 months, citing tax reforms and Payday Super.

What to watch

  • ATO implementation: watch for published details on interest-free payment plans, including who is eligible and when they start.
  • Around March 2027: roughly 12 months after the review's release, when the ATO was asked to test the impact of its improvements.
  • 21 November 2026: the date the ATO says is generally the payment date for self-preparers with a 2025–26 tax bill. Interest can start accruing on amounts not paid by the due date.
  • 2027: the Ombudsman releases complaints trend reports every six months, so the next is expected next year.
  • The ATO says lodging on time matters even if you cannot pay in full.