ATO system bugs create 'false debts'

Documents obtained by freedom of information show multiple bugs spotted by the tax agency last year were linked to the incorrect revival of historical debts.

Additionally, an email note sent by ATO officials on August 21 last year shows that an algorithm created debts "in excess" of what was owed on 20 separate occasions.

These amounts were withheld from refunds on 13 occasions.

System errors were also linked to some taxpayers receiving tax refunds that were less than what they should have received previously.

According to official correspondence a "system fix" was deployed by the agency to fix the system issues last year, with account remediation undertaken in September and October 2023.

"A total of 603 clients (inclusive of the 20 clients adversely impacted) have been identified as having 1083 incorrect transactions," a stakeholder update read.

An ATO spokesperson said the error was not a result of any malicious cyber activity.

"We acknowledge our communication approach for debts placed on hold was confusing and apologise for any frustration and confusion which may have been caused," they said.

The revelations, first published by iTnews, follow reports published in February that detailed ATO's plans to expand a scheme to revive historical debts that had been put on hold, otherwise known as "robotax".

The controversial program was launched in 2022 after the tax office was advised it could no longer overlook decades-old debts.

Greens senator Nick McKim said robotax had "shocking echoes" of the unlawful robodebt scheme, under which welfare recipients were issued with automated debt notices between 2015 and 2019.

"People are only asked to keep their tax records for five years. It is unfair for the ATO to pursue small, dubious debts that are older than that. All debts recovered under this program should be refunded in full," Senator McKim said.

"This pursuit of small historical debts should never have happened, and it should have been immediately ended once the ATO knew that a single false debt had been raised," he said.

Proposed changes included in this year's budget show the government plans to amend tax laws to allow the ATO to keep debts that have been put on hold before 2017 indefinitely.

Finance Minister Katy Gallagher confirmed that people who have already paid old debts will not be compensated.

"Individuals make choices about the payment or non-payment of debts", she told a Senate economics legislation committee.