New law lets ATO disclose Business Tax Debts

10/03/2020 12:00am

Business owners are encouraged to pay closer attention to their cash-flow management in the lead up to tax time, as new credit bureau reporting laws turn up the heat on businesses to pay their tax debts.
Under a new law that came into effect in February, the Australian Tax Office (ATO) can disclose tax debts to Credit Reporting Bureaus (CRBs) if they exceed $100,000 and are overdue by more than 90 days.
Historically businesses have used the ATO as an unofficial bank by not paying their tax commitments on time, instead of utilising their own capital to help with their cash flow needs.
Reporting to a CRB can affect the credit score of a business and in turn, have an impact on the ability of the business to borrow. On top of that, a default recording on your credit rating can last for five years.
In its Disclosure of business tax debts information online, the ATO said it will only disclose tax debt information of a business to a CRB where the business meets all of the following criteria:
  • it has an Australian business number (ABN), and is not an excluded entity
  • it has one or more tax debts, of which at least $100,000 is overdue by more than 90 days
  • it is not effectively engaging with the ATO to manage its tax debt, and
  • the Inspector-General of Taxation is not considering an ongoing complaint about the proposed reporting of the entity's tax debt information.
Businesses that are engaging with the ATO to manage their tax debts will not have their tax debt information reported to CRBs.
The change in law is designed to encourage businesses to engage with the ATO to manage their tax debts, and to support more informed decision making within the business community by making large tax debts more visible.
The ATO said it also seeks to reduce the unfair advantage obtained by businesses that don’t pay their tax on time and don’t engage with the ATO to manage their tax debts.
The ATO will notify a business in writing if they meet the reporting criteria and give them 28 days to engage with the ATO and take action to avoid having its tax debt information reported. Read the ATO Disclosure of business tax debts information here.

If your business may be affected by the new disclosure law, and you need assistance managing your cash flow, please contact Hood Sweeney Accounting & Business Advisory,  
ABN 30 007 696 595, AFS License No. 485569, on 1300 764 200

Disclaimer: The information in this article is factual information, and not advice. The information is objectively ascertainable information and is not tailored to your personal circumstances. You should consider obtaining advice before making a decision in relation to this information.

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