If your business has outstanding tax debts, watch out for a proposed new tool in the ATO's debt recovery arsenal. New laws before Parliament will allow the ATO to report some debts to credit reporting bureaus, who will then be permitted to use this tax debt information in preparing credit worthiness reports. This could adversely affect your credit status and spell trouble when it comes to getting approval for finance.
Under the proposed new laws, the ATO will be able to report a business' tax debts to credit reporting bureaus where the taxpayer:
- has an ABN, meaning only business taxpayers are affected; and
- has total tax debts of at least $100,000 that have been due and payable for more than 90 days and where the taxpayer is not actively managing or disputing the debt with the ATO; and
- does not have an active complaint with the Inspector-General of Taxation (IGT) in relation to the disclosure.
Importantly, a tax debt will not count towards the minimum $100,000 threshold if your business has entered into a payment plan with the ATO to pay the debt in instalments – provided you are complying with that arrangement!
Therefore, if you default and you don't attempt to remedy this within a reasonable timeframe, your debt will start counting towards the $100,000 threshold and your business may become subject to the debt disclosure regime.
What happens if you disagree with the ATO about a particular debt? Your debt will not count towards the threshold if you have an objection pending with the ATO, if you're seeking review by the Administrative Appeals Tribunal or Federal Court, or if you have an active complaint with the IGT in relation to the debt. However, once those actions conclude – and if the debt remains outstanding as a result – the debt will start counting towards the threshold.
The ATO will need to give you 21 days' notice of its intention to make a disclosure. So, what are your options? In addition to those outlined above, the ATO has indicated it will allow you to have the opportunity to request an internal ATO review and also to request temporary relief based on "exceptional circumstances" that affect your ability to pay your tax debts.
If you have an outstanding tax bill, we'll help you explore all your options from negotiating payment arrangements to disputing tax debts, and help you find a solution to minimise the stress on you and your business.