Anyone who’s fallen into the sights of the Australian Tax Office (ATO) and their state equivalents (OSRs) know that these instruments of government can be unfair and unreasonable, making the mafia look quite reasonable! One very big reason for these money-seeking public servants acting so aggressively towards taxpayers is because the total annual spend across the two levels of government (Federal and State) has topped a trillion dollars for the first time!

The AFR’s economics editor, John Kehoe tells us: “Total government spending across the two levels of government grew a robust 7.7 per cent in the 2024-25 year ending June 30, almost double the growth in revenue of 4 per cent, the Australian Bureau of Statistics reported on Tuesday.”

This fast growth partly explains why the tax collecting arms of these governments are terrorising business taxpayers. And that’s exactly how they’re acting – with terror.

Don’t get me wrong, our tax agencies should crack down on scam merchants and tax dodgers. But the practices of these money collectors need to be questioned on a number of grounds. Let me list them:

1. Fairness — assessments of tax owed are made and payment is expected, even if you object because you feel they got it wrong.
2. There can be a negative cashflow effect on the business that could threaten the operation survival.
3. Defending one’s position is costly and can threaten the life of the business and the jobs it creates.
4. The distraction of dealing with wrong assessments takes a business leader away from the job of building a successful business.
5. It has negative psychological effects on the business owner.

Let me repeat, while tax offices have a right to go after tax scam merchants, unless some crusading politician gets involved and tells these punishing public servants to back off, potentially successful businesses will close up or shrink their businesses to avoid the penalties that come when you grow an operation that collects GST for governments, actually pays income tax themselves and employs people who also pay tax.

I thought it significant that at the Economic Reform Roundtable there was no recognition that payroll tax is a business growth and job killer for many business builders.

On 2GB yesterday, Colin Walker of Mastercare talked about his story that the AFR covered in February. The headline of the story said it all: “An audit found Colin didn’t owe a cent. Then he was charged $1m in tax”.

Recently I came across a story of a business that was audited in 2017 by the NSW Office of State Revenue (OSR). The business owners were involved in three small but totally different businesses. Their accountant charged them $25,000 to ensure that the OSR would receive everything they needed during the lengthy and detailed audit process.

The OSR outcome was that one of the businesses had understated the amount of wages it was paying – that can happen.  But no grouping was declared. The business paid what was owing and life went on. As we all know, Covid then hit. (Here's a side note on grouping. It doesn’t seem to matter to OSR if one business is a plumbing business and the other makes sandwiches. Common ownership attracts grouping. The government gains on you being an entrepreneurial job creator. If you’re thinking: “What the f…”, I wouldn’t be surprised!)

With this business, as I said, the owner paid $25,000 to give OSR every chance to dig into the matter. The OSR agreed that circumstances proved that the small businesses were not grouped.

But wait there’s more.

Eight years on, the OSR came back again. It now disagrees with its own assessment. Not only does it want back payment of taxes for four years but it’s charging interest on the outstanding amount, penalty costs and a usury level of interest for not paying taxes that the OSR told them were not due previously. One of the three very small businesses in this case received an OSR assessment of tax owed of more than $145,000!

In summary, the OSR (or a couple of public servants who work there) has changed its mind on whether the business should be grouped. And it’s now looking for the back taxes. It’s charging penalties for not paying those taxes (that the owners didn’t even know they owed!). From what I can see, this isn’t the fault of the business, because an expert payroll tax auditor and the OSR had previously proven that this business shouldn’t be paying the payroll tax the tax collector now wants!

Did I say that even the mafia would play a fairer game that makes me ask: “Why are public servants being so unfair?” Well, try the fact that their masters (our political representatives) are overspending to the tune of more than a trillion dollars!

We need a tough politician of Elliot Ness strength to lead a group of Untouchables to reel on these gangster tax collecting public servants. I know the owners of the business I’ve just talked about are thinking of closing up shop. Politicians, especially in NSW, take note.