From 1 July 2017, the Australian Taxation Office (ATO) will inform credit rating agencies of business that have outstanding tax debts. Given 65.2% ($12.5 billion worth) of these late payers are small businesses, the move will put significant pressure on business operators to prioritise tax debt above other creditors.
Announced in the Mid-Year Economic and Fiscal Outlook (MYEFO), the plan will see the ATO disclose the tax debt information of business that have "...not effectively engaged with the ATO to manage these debts" to credit agencies.
This means that if your business has a tax debt and you have not taken steps to work with the ATO, they will ensure that you cannot access new finance or potentially maintain existing finance levels without first addressing the debt to the ATO.
There are two problems with this approach.
- The first is that one your credit rating is downgraded, it's very difficult to repair.
- The second is the legitimacy of the ATO's tax debt claim - what if they it is wrong?
The measure will initially only apply to business with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue. We have little double however that this measure will eventually extend to all tax debtors.
The important thing is that anyone with an outstanding tax debt engage with the ATO. This will prevent the credit agency threat being triggered.
If you are in his scenario, we can help by engaging the ATO on your behalf