In 2019 the Government passed law to allow the Australian Taxation Office (ATO) to disclose business tax debts to credit agencies.
Effectively this could have a negative impact on your business’ ability to attract new clients and other credit facilities to alleviate yourself from cash flow issues.
The new law which comes into effect today (21 February 2020) allows the ATO to disclose tax debts to credit reporting agencies where the business:
- has an ABN;
- has a tax debt of atleast $100,000 overdue by more than 90 days; and
- is not engaging with the ATO to manage its debt.
ATO tax debts top $24B
The law came to fruition as a result of ATO tax debts hitting almost $24 billion in 2019.
The ATO considers that an adverse credit rating (lasting up to 5 years) is a sufficient deterrent to ensure businesses become more proactive in managing their ATO debts rather than burring their heads in the sand.
An adverse credit rating has many potential implications, some as simple as making it difficult to setup basic services including:
- mobile phone plans
- fuel cards
- lines of credit
- customer accounts
This will have a negative impact on your business’ ability to attract new clients, retain credit facilities and obtain other facilities to alleviate cash flow issues.
Many small businesses could be hit
Despite increasing the threshold from $10,000 to $100,000 during the consultation phase to ensure individuals arent effected, lobby groups and watchdogs fear that many small businesses who hold an Australian Business Number (ABN) will be at risk of losing access to credit to fund personal expenses such as credit cards and home loans.
These businesses include:
- builders & developers;
- taxi drivers;
- farmers; and
- other capital intensive businesses.
The ATO will notify a business in writing if they are at risk of being reported and will give them 28 days to engage with the ATO and take action.
If no action is taken the ATO will proceed with reporting its tax debt information to credit reporting agencies.
If your business receives one of these notices it is critical that you act quickly to avoid the matter being reported.
Upturn Business Advisory are very experienced at achieving great ourcomes for new clients that havent had the best compliance history with the ATO, contact us on 1300 878 876 or get in touch via email: firstname.lastname@example.org to find out more.