Outstanding ATO debts to be reported to credit agencies from 1 July 2017
Overview
The 2017 Federal Government Mid-Year Economic and Fiscal Outlook (MYEFO) announced that from 1 July 2017, the Government will allow the ATO to disclose tax debt information of businesses to Credit Reporting Bureaus. The ATO does not currently provide this information. The measure is designed to put pressure on businesses that have not managed their debts with the ATO effectively. The ATO is currently owed $19b in overdue tax, approximately two thirds of which is owed by small businesses with a turnover under $2m.
Who is affected?
Initially, this debt reporting process will apply to the following:
- Businesses with an Australian Business Number;
- With a tax debt of over $10,000; and
- The tax debt is at least 90 days overdue.
How will you be affected?
Businesses who fall within the above categories may have a credit default recorded on their commercial credit file. A credit default lasts for five years and may negatively impact support from financiers and the ability to obtain credit from suppliers.
What to do if you are affected?
If you currently have business tax debts owing to the ATO of more than $10,000, attempt to reduce the level of debt below $10,000 prior to 1 July 2017. If you do not currently have tax debts to the ATO in excess of $10,000 attempt to keep debt levels low. Also remember this new approach from the ATO when prioritising creditor payments from 1 July.
It remains to be seen how the ATO will implement this new measure, however, given the potentially serious consequences of having a credit default recorded, we would suggest that you take action to manage ATO debts accordingly.
Please contact us if you require assistance in planning to reduce the level of your ATO debts or with your cash flow planning to ensure this new measure does not apply to your business.
