Why is the Australian Taxation Office (ATO) preparing contingency plans now?

The ATO is preparing for potential economic deterioration driven by an international fuel crisis and high oil prices, which have recently exceeded $US100 a barrel. While the agency is currently providing limited administrative relief, it is readying its systems to deploy larger-scale support if business conditions worsen significantly.

What tax relief is currently available for small businesses affected by high fuel costs?

Under the government’s "Stage 2" response to the fuel crisis, the ATO is offering expanded administrative concessions rather than direct cash injections. These include more generous payment plans, the remission of interest and penalties, and adjustments to PAYG installments for businesses seeing a downturn in taxable income.

How many businesses have applied for the ATO fuel crisis concessions so far?

Despite the spike in energy costs, uptake has been surprisingly low, with interest registered in the "low thousands." This represents a tiny fraction of Australia’s four million small businesses.

What is a "zombie business" and why is the ATO concerned about them?

A "zombie business" is a company that is essentially unviable but remains operational only due to temporary government support or leniency. The ATO is cautious about providing excessive relief because it can erode tax discipline and keep unproductive firms alive longer than they should be.

Which sectors have the highest risk of "zombie business" exposure?

According to NSW Treasury research, the mining and agriculture sectors have the highest employment exposure to "zombie businesses" in Australia. This is particularly relevant for Western Australia, where these industries are dominant.

How does the current ATO support compare to the COVID-19 pandemic response?

The current support is significantly smaller in scale and focuses on administrative flexibility rather than the "massive fiscal injections" seen during the pandemic, such as JobKeeper. While the ATO is prepared to reactivate those larger systems if necessary, the current strategy is much more targeted to avoid distorting the market.

ATO readies contingency plans despite low relief uptake

Written by Heidi Cuthbert Published May. 4 2026Last Updated May. 4 2026

The Australian Taxation Office has finalised contingency frameworks to address potential economic deterioration, even as initial data reveals a surprisingly low uptake of government-sanctioned tax relief.

Despite the Middle Eastern conflict and the closure of the Strait of Hormuz driving oil prices above US$100 a barrel, ATO Second Commissioner Jeremy Hirschhorn confirmed that interest in concessions remains limited to the "low thousands"—a fraction of Australia’s four million small businesses.

Following Treasurer Jim Chalmers’ April announcement of temporary relief for firms struggling with surging costs, the ATO is currently operating under "Stage 2" of the national fuel crisis response.

The phase focuses on expanded administrative concessions, such as more generous payment plans and the remission of interest, rather than the massive fiscal injections seen during the pandemic.

Hirschhorn noted that while the agency is ready to "dust off" systems used for JobKeeper, any large-scale intervention remains "well down the path".

A cautious approach dominates the ATO's strategy, informed by NSW Treasury research into "zombie businesses".

Officials warned that excessive leniency can be "cruel in the longer term" by eroding tax discipline and artificially sustaining unviable entities.

With employment exposure to such businesses particularly high in the mining and agriculture sectors, the ATO is balancing immediate support with long-term fiscal stability.

The agency maintains a streamlined digital portal for affected firms to flag interest, ensuring that institutional knowledge from past crises is leveraged without prematurely distorting the market.