The Australian Taxation Office (ATO) has awarded over $42 million in contracts to the private debt collection agency Recoveriescorp, igniting debate over its aggressive pursuit of taxpayers, including welfare recipients. The contracts, detailed on the government’s tender portal, underscore the ATO’s increasing reliance on third-party collectors, which has coincided with a rise in complaints to the tax watchdog.
Recoveriescorp has been embedded within ATO offices since 2022, acting as an extension of the agency’s debt collection team. The partnership expanded in 2024 to include offsite services, allowing the private firm to pursue debts independently. According to reports, more than 355,000 taxpayers have been referred to Recoveriescorp since January 2024.
Impact on Vulnerable Taxpayers
One taxpayer, a 55-year-old welfare recipient, shared her ordeal of being given just one week to pay a debt of $2,590.33, with Recoveriescorp warning of potential legal action by the ATO. She was already making regular payments to the ATO when her case was handed over to the external collector. A spokesperson for Recoveriescorp cited contractual restrictions in declining to comment on individual cases but emphasized the agency’s commitment to respectful treatment and adherence to collection guidelines.
Kirsty Robson, a senior financial counsellor with the Consumer Action Law Centre, noted a significant increase in consumers seeking assistance after being pursued for tax debts. She criticized the ATO’s approach, stating,
“There’s no understanding of vulnerability or family violence, things of that nature, where a tax debt is unmanageable. The enforcement then increases in severity, which only exacerbates someone’s vulnerability. It’s a systemic problem.”
Background and Policy Shifts
The collaboration between the ATO and the Allegro-owned Recoveriescorp is part of a broader initiative to recover tax debts, a priority that intensified during the pandemic when the ATO was directed to adopt a more lenient approach. The use of Recoveriescorp’s staff was not widely publicized until 2024, when the ATO announced it would begin referring taxpayers to the private collector.
The ATO has consistently maintained the necessity of recouping approximately $50 billion in outstanding collectible debt, which it claims is largely self-reported by taxpayers. An ATO spokesperson described the Recoveriescorp contract as a “flat fee-based commercial model” without performance-based bonuses. Both onsite and offsite collectors are required to adhere to ATO-approved guidelines.
Criticism and Calls for Reform
The use of Recoveriescorp has drawn criticism from independent federal politicians Zali Steggall and Andrew Wilkie, who have condemned the approach as “heavy-handed” and indicative of “deep cultural problems” within the ATO. The tax ombudsman has also reminded the ATO to consider individual taxpayer circumstances, following an increase in complaints about the agency’s debt collection methods.
Recoveriescorp’s “final notice” letters, which demand payment within seven days, have been criticized for causing undue panic among recipients. One taxpayer reported receiving the notice only three days before the deadline, describing it as a tactic to “rush you, cause maximum panic.” While debt collection guidelines do not specify a minimum notice period, they do require reasonableness in practice.
Future Implications and Reactions
The total value of contracts awarded to Recoveriescorp since 2022 amounts to $42,787,967.71. As the ATO continues its efforts to recover debts, the controversy surrounding its methods and partnerships may prompt further scrutiny and calls for reform. The situation highlights the ongoing tension between effective debt recovery and the need to protect vulnerable taxpayers from undue hardship.
As this story develops, stakeholders and policymakers will likely continue to debate the balance between fiscal responsibility and social equity in tax collection practices.
