Why tax debts are not time-barred
Understanding the nature of Crown debts, particularly
debts owed to the Australian Taxation Office (ATO), is essential
for advisors and their clients to make informed
decisions.
While most ordinary liabilities in Australia are subject to
strict limitation periods under state legislation, Commonwealth tax
debts are governed by a completely different legal framework. As a
result, ATO debts do not become statute-barred,
even after decades.
This article explains how and why this distinction
exists.
State Limitation Acts do not apply to Commonwealth debts
For creditors, the recovery of debts is restricted by state
legislation, such as the Limitation Act 1969 (NSW), Limitation of
Actions Act 1958 (VIC), Limitation of Actions Act 1974 in Qld,
Limitation Act 1985 in ACT, and Limitation Act 2005 (WA), which
impose a six-year limitation period on simple contract debts.
However, these limitation regimes do not apply to
