Does your small business currently have an outstanding tax debt with the ATO? If you answered ‘yes’ to this question then this new legislation affects you.
The ATO is owed $19b in overdue tax, approximately two thirds of which is owed by small businesses with a turnover under $2m. The rising level of debt, particularly in small business, presents a growing challenge for the ATO as they are faced with managing the delicate balance of collecting tax arrears without (where possible) suffocating the cash flow of the business.
From 1 July 2017, the ATO will have the power to disclose any outstanding tax debts to a registered credit-reporting bureau. However for your debt to be divulged to a credit agency, certain criteria must be met. These include:
- The business has an Australian Business Number (ABN), and is not an excluded entity;
- The business has a tax debt, of which at least $10,000 is overdue by more than 90 days; and
- The business has not effectively engaging with the ATO to manage its tax debt.
Should your business meet the above criteria the ramifications are severe and will have an immediate impact on your business. It will cause a black mark on your credit rating which will last for 5 years. This may cause current and future financiers from assisting your business and suppliers may cease to provide credit.
The ATO are yet to define the meaning of ‘effectively engaging with the ATO’, however we expect this to include businesses that have established a payment plan or are disputing their tax-related liabilities.
If you are a business owner that has a tax debt and have already engaged in a payment arrangement with the ATO there is no need to be concerned, as you will not be reported.
Given the above, we suggest there is clearly no better time to engage with the ATO in regards to any outstanding tax debts your business may have.