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The ATO is clamping down on businesses with tax debts

Jul 13 2022

The ATO is clamping down on businesses with tax debts

In late 2019, a new measure was introduced allowing the Australian Taxation Office (ATO) to report outstanding tax debts to credit reporting agencies. As part of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, the ATO has the power to disclose a business’s tax debts of $100,000 or more to a credit bureau, a body that collects and shares data with credit providers about a borrower’s financial history.

The new laws came into effect in 2020, however due to the COVID-19 pandemic, the ATO put these powers on hold. The ATO has advised the time for leniency has expired and they will be clamping down on businesses with tax debts who don’t come to an agreement with the tax office.

Each week Credit Reporting Agencies will receive updates from the ATO which will report on any business that:

  • owes more than $100,000 in tax
  • has an Australian business number (ABN)
  • is more than 90 days in arrears
  • does not have a payment plan in place or being negotiated
  • does not have an active complaint with the Inspector-General of Taxation Ombudsman about the ATO’s intent to report its tax debt information
  • is not a public sector entity, a registered charity, a deductible gift recipient or a complying superannuation fund that is exempt from tax debt disclosure.

The tax debts can include outstanding income tax, activity statements, fringe benefits tax, superannuation guarantee debts, penalties and interest.

Don’t use the ATO as a ‘line of credit’
In the past, businesses have sometimes used the ATO like a ‘line of credit’ by not paying their tax commitments on time. Now, this is much more likely to have an adverse impact on credit ratings and credit insurance limits, making it much more difficult to maintain or extend credit terms with suppliers.

Over the past two years, insolvencies have been at record lows in Australia as the government provided ongoing pandemic support packages, as well as the ATO being lenient and allowing taxpayers to defer payments without imposing penalties or interest.
Last year, the ATO began sending warning letters to businesses notifying them that they intend to disclose tax debt information. It’s not just corporate insolvencies that are set to increase; personal insolvencies are also predicted to rise as economic pressures bite.

What to do if you have a tax debt? First, engage with the ATO.

Keeping lines of communication open means there is less chance your tax debts will be disclosed as you work with the ATO to set up a payment arrangement or apply for the debt to be released.

Cash flow finance options such as BCashflowPositive can assist by freeing up cash in unpaid invoices to relieve the pressure on cash restraints whilst waiting for the customers to pay.

Since 1989, we have been helping to relieve cash flow pressures suffered by Australian businesses. Our goal is to assist our clients at every stage of their business with transparency, flexibility and the very best customer service. Get in touch with us today to learn more about how we can help.

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