ATO’s New Powers to Disclose Business Tax Debt to Credit Reporting Bureaus

Have you received a letter from the Australian Tax Office lately regarding your business tax debt? If you have, keep reading. Your tax debt may now negatively affect your business’s credit rating and ability to source new finance.

Businesses with over $100,000 in tax debts may have received letters from the ATO warning them that they intend to disclose tax debt information to Credit Reporting Bureaus (CRB’s) if they do not make an effort to manage their debts within 28 days.

The ATO’s new powers come after the government passed a law in late 2019 to clamp down on businesses with tax debts of more than $100,000 that are at least 90 days overdue.

Nowadays, the ATO may report tax debt for entities (that are not excluded entities) that has an ABN and debt of at least $100,000 outstanding greater than 90 days. The Commissioner now has the power to send taxpayers a letter outlining their intention to disclose the debts to various CRB’s.

If this relates to your business, here’s what you need to do:

What to do if you have a tax debt? First, engage with the ATO

Engaging with the ATO, preferably through your trusted Morrows advisor, is the first thing to do. The ATO prefers you keep the lines of communication open, which means that if you engage with the ATO, there is less chance your tax debts will be disclosed. This includes working with the ATO to set up a payment arrangement or applying for the debt to be released.

Here’s an example of what NOT to do;

ABC Company Pty Ltd lodged their 2020 Income Tax Return in May 2021, and a tax debt of $105,000 was due. Unfortunately, the company did not get their trusted Morrows advisor to engage with the ATO and instead ignored the debt. The Commissioner sent ABC an intent to disclose notice, and after 28 days, the tax debt was reported to various Credit Reporting Bureaus. As a result, ABC is now unable to secure credit for the purchase of new assets and equipment.

Here’s an example of what you SHOULD do:

ABC Company Pty Ltd requested their trusted Morrows advisor to actively engage with the ATO by entering a payment arrangement and the intent to disclose notice was avoided. ABC can now secure credit from their bank to purchase new assets and equipment to prepare for new business growth.

If you have received a letter relating to your business tax debt or wish to understand how to minimise your business’s credit rating risk, please feel free to contact your friendly Morrows Tax and Business Advisor.