ATO to act on SME tax debt, brokers warned
29 September 2021
SMEs and their brokers have been urged to be vigilant as the ATO begins acting on powers to disclose SME tax debt to credit reporting agencies.
In 2019, the federal government passed the Treasury Laws Amendment, which contains a measure to allow the Australian Tax Office (ATO) to disclose small-to-medium enterprise (SME) tax debt to credit reporting agencies.
The bill allows the ATO to report a business to credit reporting agencies if the business owes more than $100,000 in tax, has an ABN, is more than 90 days in arrears, and does not have a payment plan in place or being negotiated.
However, these powers were paused to allow SMEs to cope with the economic impacts of the coronavirus pandemic, until now.
As such, brokers should warn their SME business owners and their accountants to be proactive by being informed of any ATO debt or associated repayment arrangement they have with creditors such as the ATO, before it starts reporting to credit reporting agencies.
It is reported many accounting practices have indicated that the ATO is once again sending SMEs notification of intent to begin reporting their outstanding tax debts to credit bureaus.
It is recognised that in the past, SME owners have sometimes used the ATO like a line of credit by not paying their ATO commitments on time.
However, this could have an adverse impact on their credit ratings if they continue this practice, which could hinder their ability to maintain or extend credit terms with suppliers or obtain finance.
The ATO is no longer prepared to be viewed as a line of credit.
Instead, debtor finance (invoice finance) or any other finance product could serve as alternatives for SMEs in this position. No matter what part of the economic cycle we are in, if a business has a solid debtor book or has owned equipment on its balance sheet, you will be able to access invoice finance or another loan product, meaning there is no need for the business owner to be put through hoops to qualify for a loan that has to be repaid.
You should urge business owners to invest time alongside you as their trusted broker, to carefully consider what is the best funding for their business situation and get that funding in place early so they don’t end up on the wrong side of this credit reporting initiative.
(Compliance, Risk & Advisory 29th Sept., 2021)
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Disclaimer
The material in this communique is for the benefit and information of clients. The items are in the nature of general comments only, and are not to be used, relied or acted upon without seeking further professional advice. Quantum Business Finance accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice.