The ATO is cracking down on outstanding debts

By Key Factors - Jul 19 2022

The Australian Taxation Office (ATO) has confirmed it is clamping down on businesses with tax debts and they will be disclosing a business’ tax debts to credit reporting agencies. With one credit reporting agency reporting in a recent newsletter, “After years of advocating for improved tax debt transparency, we’re please this has finally arrived”.

A new measure introduced in late 2019 as part of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, gave the ATO the power to disclose a business’s tax debts of $100,000 or more to a credit bureau, which is a body that collects and shares data with credit providers about a borrower’s financial history.

Each week Credit Reporting Agencies will receive updates from the ATO on businesses that: have one or more tax debts, and at least $100,000 is overdue by more than 90 days and:

  • are not engaging with the ATO to manage their tax debt
  • do not have an active complaint with the Inspector-General of Taxation Ombudsman about the ATO’s intent to report its tax debt information
  • have an Australian business number (ABN)
  • are 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.

It’s time to act, ignore the tax man at your own peril.

During the past two years insolvencies have been at record lows on the back of [specifically in the case of Australia] the government providing ongoing pandemic support packages in conjunction with the ATO being lenient and allowing taxpayers to defer payments without imposing penalties or interest.

This is the first time the ATO will follow the new compliance process since the federal government introduced the disclosure of business tax debt measure in 2019.
The earlier process of issuing directors intention notices to disclose a business’ tax debt which started in 2021 but really ramped up in the first half of 2022 was about engaging those businesses that have continued to ignore attempts to work with the ATO to manage their tax debts.

And it’s not just corporate insolvencies that are set to increase; personal insolvencies are also predicted to rise as economic pressures bite.

Businesses have been warned against using the ATO as an alternative line of credit with these new debt reporting powers coming into play.

So, plan now, engage with the ATO and your advisor and work out how to deal with the matter at hand.

This is where cash flow finance options such as Key Factors can assist, 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 supporting businesses of all sizes with leading financial solutions, tailored to your needs. You will benefit from immediate cash coming in, to fix your cash flow issues. To learn more about us, get in touch with our team today.

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