Complaints from Australians being pursued by the tax office have skyrocketed in recent months as the ATO takes a tougher approach on collections in an attempt to wrangle $115bn in outstanding debt, according to fresh figures from the Tax Ombudsman.
In her biannual report card for the Australian Taxation Office, the ombudsman noted a 74 per cent increase in complaints in April through to September when compared to the same period last year, and a whopping 180 per cent over two years.
Trust-holders that broke “family trust distribution tax” rules, many doing so unknowingly, are facing an explosion in historic debts, with examples of a historic $47,000 liability in the 1990s ballooning to a bill of $890,000 today.
“We continue to see an unprecedented demand for our services. Our latest complaint data shows more people are struggling due to the ATO’s debt collection activity or interest charges or simply need to resolve delays to payments they are due,” Tax Ombudsman Ruth Owen said.
“At a time when many Australians are facing financial distress, we are seeing increased complaints about how the ATO is collecting tax debt owed and how interest is applied to the debt, often making the amount due impossible to pay back.”
Around half of debt-related complaints received by the ombudsman related to applications for release of debt due to hardship and director penalty notices, while 77 per cent of penalty related inquires related to general interest charges.
In only 5 per cent of cases were penalties or interest reduced or remitted, down 17 per cent on the same period last year, which the ombudsman said indicated the “ATO’s tougher approach to debt collection”.
Tax Ombudsman Ruth Owen.
“The concentration of complaints we’re seeing around tax debt, interest, missing superannuation, and delayed refunds indicates people are doing it tough at the moment but they’re still trying to do the right thing and engage with the tax system,” Ms Owen said“Whilst we cannot always change an ATO decision, we can provide independent assurance that the ATO acted reasonably and help people understand what happened on their particular matter and why. The latest figures show a 9 per cent decrease in the number of complaints where the ATO was found by the ombudsman to have “acted reasonably” in relation to debt collection. With looming changes to the taxation of negative gearing, capital gains and trusts, concerns have been raised by a number of bodies over historic family trust distribution rules (FTDT) pointing to an example of a historic $47,000 liability ballooning to a $890,000 bill today. FTDT is levied at 47 per cent of the gross amount distributed, and general interest charges start compounding 81 days later without any assessment ever being issued. Interest then compounds daily at seven percentage points above the bank bill rate, so at current rates an unnoticed liability roughly doubles every six to seven years.
Thomas Henry is a reporter for The Australian's Canberra press gallery bureau. He joined the masthead after graduating from the 2025 cadet program and holds a Bachelor of Economics from Sydney University.
Should the ATO share more data?
Soltani said the findings strengthened the case for secure data sharing between the Australian Taxation Office (ATO) and banks, provided borrowers gave their consent.
“That would let lenders verify declared income against an independent government source, rather than relying on a PDF that can be altered in seconds with AI,” said Soltani.
Zhong cautioned, however, that making access to tax information a condition of obtaining a mortgage would undermine the idea that data sharing was voluntary.
She also raised concerns about how the information might be used beyond income verification.
“The second [question] is scope creep: data collected to verify income shouldn’t be used for marketing, pricing or other purposes,” Zhong.
“The third is security, because any new pipeline for sensitive government data becomes a target.”
Zhong said a better approach would be a 'verify, don't share' model, in which lenders could confirm whether a borrower's declared income broadly matched ATO records without receiving their full tax information.
Banks uncover major mortgage fraud
The findings come amid growing concerns about mortgage fraud in Australia and the role AI is playing in making it easier to falsify financial documents.
In February, the Commonwealth Bank of Australia alerted authorities to a possible fraud racket that obtained approximately $1 billion in illegitimate home loans, including through the use of AI.
In August, Australia’s financial crimes watchdog AUSTRAC revealed that an analysis of data from 10 major Australian banks identified potentially hundreds of millions of dollars in suspected fraudulent loans, mostly linked to properties in Sydney.
AUSTRAC said the suspected mortgage fraud involved inflated incomes, misrepresented employment, and fabricated or unverifiable business activity used to support loan applications.
AUSTRAC chief executive Brendan Thomas said generative AI was now “widely used” to create or alter fraudulent documents, making them easier and potentially more convincing to produce.
“The banks see fraud regularly — the risk is not new, but advances in AI technology are making it easier to commit fraud at scale,” Thomas told Information Age.
“While AI may make it easier to generate false or misleading documentation, our focus remains on behaviours, risk indicators and vulnerabilities rather than the specific tools used to facilitate them.
“People applying for home loans must provide accurate and truthful information, whether they use AI or not.”
