ATO’s outsourced debt collectors face much worse conditions than those in public service

In the Australian Taxation Office’s workplace in the Melbourne suburb of Dandenong, a team dedicated to debt collection sits in the eastern part of the floor.

They use the same kitchen and bathrooms as nearby workers, but they are paid much less than those in the public service also collecting debts, and face inferior conditions.

Former workers at the ATO’s private debt collector, Recoveriescorp, say they are kept in the shadows, leading to poor working conditions for outsource workers and inconsistent decisions for taxpayers seeking help with their debts.

“We were just like battery hens sitting at our desk making calls to collect debts,” says one former worker, who requested anonymity due to employment confidentiality provisions.

“Occupational safety just went out the window; you’d get pulled up for taking too long going to the toilet.”

A second former Recoveriescorp employee says resignation rates are extreme, which the person says is bad for taxpayers because they must constantly deal with inexperienced staff making life-changing decisions about debt repayments.

“The tax office is well aware that this is happening because they would have the attrition numbers,” the former worker says.

“The ATO would also see the number of complaints rising. The public actually knows there’s something wrong but at the end of the day it comes down to cost, which is not fair on us, or taxpayers.”

The ATO is one of the most prolific users of outsourced workers through its use of three major call centre operators – the private equity-backed Probe Operations, the Nasdaq-listed Concentrix Services and the British multinational Serco – as well as the private debt collector Recoveriescorp.

It has awarded Recoveriescorp $42.8m worth of contracts since 2022, according to the government tender portal. Recoveriescorp has paid zero corporate tax in recent years.

The close relationship includes “insource” Recoveriescorp employees embedded into the ATO who are instructed to tell taxpayers they are from the tax office, and “outsource” employees working under the debt collector’s name.

A Recoveriescorp spokesperson said the company was unable to comment due to contractual restrictions.

The ATO referred more than 355,000 taxpayers to Recoveriescorp between January 2024 and October 2025. The tax office declined to provide updated figures.

‘Higher level of stupidity’

The expanded use of Recoveriescorp came amid a push by the ATO to recoup more than $50bn in what the agency describes as “outstanding collectible debt”, a figure that grew significantly during the pandemic.

A recent review by the Tax Ombudsman, the independent watchdog for the tax system, described the ATO’s decision-making as “inconsistent”.

The report found the tax office issued “vague guidance and poor communication”, which led to “confusion and unfair outcomes” for taxpayers seeking a reduction or refund of interest charges.

Taxpayer complaints have doubled over a 12-month period, according to the tax ombudsman, Ruth Owen, who says the majority of complaints are about debt collection.

“Mostly the complaints I get are from people who actually want to pay their debt back, but they can’t meet the conditions that the ATO has set for them,” Owen tells Guardian Australia.

“The other issue is compound interest. If you’ve got a debt and the ATO is charging 10.65% compounding interest on that, even a small debt can get large very quickly.

“I want the ATO to make sure they are taking every taxpayers’ individual circumstances into account and showing a degree of empathy in recognising some people are struggling while still trying to pay their debts back.”

Government agencies initially outsourced various operations to handle changing demand or access specialised skills, a practice the Community and Public Sector Union says was ramped up by Coalition governments.

But Labor’s attempt to curb reliance on external consultants and outsourced workers has stalled just two years after the government ordered skills to be brought back in-house.

While the ATO has defended its use of outsourced providers in front of parliamentary committees as a means to address “surges in demand”, the ombudsman says that it is “their chosen model that they have throughout the year”.

In 2024-25, the ATO spent more than $316m on external labour, according to figures provided to parliament.

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The Greens senator Barbara Pocock says the ATO’s use of outsource workers embedded into their offices has “created a two class system within the public sector”.

“This is yet another example of the ATO outsourcing core work to workers subjected to worse pay and conditions than others doing the same job,” Pocock says.

“The ATO should be a model example of finance, not the cautionary tale.”

The employment relations expert David Peetz, a professor at Griffith University, says the outsource model in government agencies has been taken to a “higher level of stupidity”.

“Once it’s embedded, your budget gets adjusted and it’s very hard to reverse,” Peetz says.

Wildly inconsistent decisions

An ATO spokesperson said Recoveriescorp employees were provided with appropriate training that was commensurate with training provided to ATO officers.

The spokesperson said Recoveriescorp employees act on behalf of the ATO and “operate under strict ATO controls, oversight and governance arrangements”.

“The ATO uses Recoveries Corporation to supplement its debt management services by handling high volume, lower complexity cases. This allows ATO internal staff to focus on specialised support and stronger collection actions,” the spokesperson said.

Over the past several months, Guardian Australia has examined the operations of several outsourced providers, which secure government contracts by guaranteeing public service-level quality at a reduced cost, while generating a profit for their owners.

Former Recoveriescorp workers embedded into the ATO say they earned about $60,000 a year, which they say was at least $15,000 to $20,000 less than public service workers doing the same or similar work.

Outsourced workers also report their breaks are typically shorter than those of APS staff and that they are given less time for administrative tasks, which encroaches on their breaks.

A third former Recoveriescorp worker tells Guardian Australia that one of their core jobs was to decide on taxpayer requests to reduce or refund interest charges.

The person says the “inadequate training” leads to wildly inconsistent decisions that affect people’s livelihoods.

“It can come down to luck. You might get a favourable response, like getting interest waived, but then you might get a straight out rejection because of a staff member’s lack of training.

“It’s just not fair on people who are generally looking to work with the ATO.”

Do you know more? Contact jonathan.barrett@theguardian.com