The Australian Tax Office (ATO) plans to disclose tax debt information to credit reporting bureaus from 1 July 2017. This will involve the tax debt information of businesses who failed to effectively engage with the ATO to manage their tax debts.
If a taxpayer remains disengaged even after the tax office has exhaustively carried out means to collect their outstanding debt, their tax debts should be reported to a credit reporting agency.
This move is one of the Government’s strategies to take charge of overdue tax and raise transparency of taxation debts. The Government has been advocating the tax ruling for a number of years dating as far back as 2014 so this should not come as a surprise to those who will be affected, particularly the small business community.
It is anticipated that initially this policy will only apply to businesses with ABNs and a tax debt of more than $10,000 unpaid for over 90 days. Debt information of businesses who have not established a payment plan or if their existing payment plan has defaulted will also be reported. If your business is reported, these notifications will then remain on credit files for five years.
Apparently, the $19B overdue tax owed to ATO is likely caused by enterprises with a turnover of less than $2M. It seems that small businesses are the ones running away from their tax responsibility.
When a small business starts to face challenges in terms of their tax, the tax office sometimes pounces on. But more often than not struggling businesses would rather leave their tax debts behind than pay it, and before they know it, their debts have soared.
With this measure, the Government expects businesses to pay their tax debts in a timely manner to prevent affecting their credit rating.
However, there is a huge chance this new policy once implemented will evoke unpleasant remarks from taxpayer rights group. The ATO assures that “In administering the taxation and superannuation laws, we collect and hold a wide range of personal information. We may get this information from you, or from other parties. We undertake to respect your privacy and keep your information confidential, including sensitive information.”
Given the potential challenges small businesses will face with this new policy, effective management of cash flow is of vital importance. If your business has tax debt or struggling with cash flow, contact Kelly’s Commercial Finance. Let’s talk about your options and find the best possible solution to your problem.
