ATO debt insights 2024–25: Areas to watch

The ATO’s 2024–25 Annual Report provides critical new data on tax debt trends, with a particular focus on small businesses and disengaged taxpayers. 

If you have clients experiencing financial distress, these insights are essential for proactive risk management and client support.  January is the perfect month for reviewing your client’s tax compliance history and debt levels to ensure that any festering problems can be addressed quickly.

Key debt insights from the ATO annual report

Debt holdings by group

The ATO defines collectable debt as tax and superannuation liabilities that are overdue and not subject to dispute, insolvency, or classified as uneconomical to pursue. In other words, collectable debt is the portion of outstanding tax debt that the ATO considers recoverable through its normal collection processes.

• Small businesses remain the largest source of collectable debt, now at $35.9bn (up from $35.2bn last year).
• Individuals: Collectable debt increased to $5.3bn.

Debt holdings by revenue type 

• Activity Statement Debt (includes GST, PAY, etc.): $34.7bn collectable, with $13.1bn in insolvency/dispute.
• Income Tax Debt: $16.9bn collectable, $3.2bn in insolvency/dispute.

Disengaged taxpayers with significant debts 

• Small Businesses: 39,352 disengaged taxpayers with debts >$100,000 and >90 days overdue, totalling $11.3bn.
• Individuals: 5,027 disengaged, $1.3bn in collectable debt.
• Director Penalty Notices:
  • The ATO issued 84,529 director penalty notices to individual directors, covering liabilities of $5.5bn. As of 30 June 2025, $1.2bn of these liabilities had been collected.

Industry breakdown of disengaged small business debts

The most affected industries (by value of disengaged collectable debt):

• Construction: $4.3bn (14,674 disengaged taxpayers)
• Professional, Scientific & Technical Services: $1.9bn (4,850)
• Accommodation & Food Services: $1.2bn (4,195)
• Administrative & Support Services: $1.1bn (3,290)

What does this mean for your clients?

• The ATO is aware of the tools available to it to collect outstanding tax debt and are using these tools successfully. The amount of collectable debt increased to $54.2bn at 30 June 2025, from $52.8bn at 30 June 2024; an increase of $1.5bn (2.8%). This is the smallest yearly increase since the period pre pandemic, and a sign that the ATO’s current approach to debt collection is slowing the growth of collectable debt.
• Small businesses in construction, professional services, hospitality, and support services are at highest risk of ATO enforcement due to high disengaged debt levels.
• Disengaged taxpayers (no active payment plan or insolvency process) with large, overdue debts are likely to face firmer ATO action, including legal recovery.
• Insolvency-related debt is rising, especially among small businesses and privately owned groups.

Action steps for accountants:

• Identify at-risk clients—especially those in high-debt industries or with overdue liabilities >$100,000.
• Encourage early engagement with the ATO to avoid escalation (payment plans, voluntary disclosure, or insolvency advice).
• Monitor clients’ compliance with activity statement lodgements and superannuation obligations.
• Advise on restructuring or insolvency options - Our Restructuring & Recovery team can assist with client assessments, workouts through an Options plan, restructure through a Small Business Restructure or insolvency solutions for your clients.

Further information can be found here.