What does uneconomical to pursue mean on my ATO account?

What the ATO actually did

The ATO has a long-standing power to decide not to pursue a debt that is uneconomical to pursue. It considers the likely cost of recovery against the amount, the age of the debt, whether it can find you, your asset position, and whether earlier attempts to collect failed. If it decides not to pursue, the debt is written off in the ATO's accounts and shown on yours as a debt on hold.

That is an accounting entry, not a legal release. The ATO's own wording is that the debt remains due and legally payable. You cannot object to the decision to put a debt on hold or to take it off hold, because it is an administrative choice about collection, not a decision about whether you owe the money.

Compare this with release, waiver and write off. Only release and waiver end a debt. A write off as uneconomical does not.

What it means for you in practice

• Refunds and credits are taken. Offsetting is required by law. If you lodge a return and are due a refund, the ATO applies it to the on-hold debt first. This is the usual way people discover an old debt. See why your refund was used to pay an old debt.
• It can come back. If your situation changes and collection becomes cost effective, the ATO may take the debt off hold and start asking for payment again.
• It now shows in your balance. The ATO has been adding on-hold debts to account balances, with the description existing debt on hold included in account balance. When it does so, it continues to remit general interest charge for a further six months, after which GIC applies to the debt again.
• Pre-2017 debts are different. The ATO has not been adding back debts placed on hold before 1 January 2017, and those have been written off following a change in the law.
• No time limit. There is no statute of limitations on tax debt, so an on-hold debt does not expire with age.

What you can do about an on-hold debt

You have a few options, and none of them is to wait.

1. Check the debt is right. Old debts can come from default assessments or periods you disputed. If it looks wrong, ask the ATO for the history and consider whether you can amend or dispute the debt.
2. Ask for interest remission. The six months the ATO applies automatically is a floor. If the debt sat for years without contact, a further remission request is reasonable.
3. Set up a plan on your terms. An ATO payment plan lets you pay it down in instalments rather than losing an entire refund at once.
4. Apply for release if you are in serious hardship. Individuals and sole traders can seek release of income tax and similar debts. A debt on hold is still a debt that can be released.

More on the wider picture, including why these debts resurfaced, is at old ATO debt reappeared.

What to do next

1. Log in to ATO online services and look for the wording debt on hold or included in account balance on your statement of account.
2. Ask the ATO for a transaction history so you know which period the debt comes from and whether it was a default assessment.
3. Request remission of general interest charge for the years the debt sat on hold.
4. If you cannot pay in one go, set up a payment plan before your next refund is due, or apply for release if you are in serious hardship.

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