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New ATO power to disclose business tax debts

Mannions Business Services - Thursday, November 21, 2019

Proposed new ATO powers to disclose business tax debts to credit reporting agencies mean businesses with long-term unpaid tax bills could see their credit rating affected. But fortunately, this is a measure of last resort. Find out what tax debts are potentially captured and how you can ensure your business isn’t stung with a disclosure.

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.

When can the ATO disclose a debt?

Under the proposed new laws, the ATO will be able to report a business’ tax debts to credit reporting bureaus where all of the following criteria are met:

  • The taxpayer has an ABN, meaning only business taxpayers are affected. (Charities and superannuation funds will be excluded.)
  • The taxpayer 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 (see below).
  • The taxpayer does not have an active complaint on foot 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!

For this reason, it will be more important than ever to stay on top of your payment plan instalments. If you default and you don’t attempt to remedy this (or enter a new payment plan) 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.

Can my business stop the disclosure?

The ATO will need to give you 21 days’ notice of its intention to make a disclosure. So, what are your options? As outlined above, you can prevent disclosure by entering a payment plan, disputing the underlying tax debt, or complaining to the IGT about the proposed disclosure. Additionally, the ATO has indicated it will allow the following courses of action:

  • You’ll have the opportunity to request an internal ATO review (as an alternative to making a formal complaint with the IGT).
  • You’ll also be able to request temporary relief based on “exceptional circumstances” that affect your ability to pay your tax debts, including natural disasters and family tragedy or serious illness of a representative of your business (eg a director). This relief will prevent disclosure, but the underlying tax debts will still remain payable. The ATO has already explained that financial hardship will not be accepted as exceptional circumstances for these purposes.

Help is at hand

If you’re losing sleep over an outstanding tax bill, contact us today for expert advice and guidance. From negotiating payment arrangements to disputing tax debts, we’ll help you explore all your options and find a solution to minimise the stress on you and your business.

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