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New law proposed to increase tax debt transparency


The government is seeking to increase transparency of business tax debts which could be a win for small business engaging with suppliers, assuming the ATO operates strictly within its guidelines and doesn’t target businesses which are likely to meet their debt obligations.

By Katarina Taurian 9 minute read

Minister for Revenue and Financial services, Kelly O’Dwyer, yesterday released draft legislation which proposes authorising the ATO to disclose business tax debts to credit reporting bureaus where the businesses have not effectively engaged with the regulator to manage their debt.

You can read the full exposure draft here.

With few exceptions, this will apply to businesses with a minimum of $10,000 owing for 90 days or more. It is effectively the same level of transparency that is available to a bank. 

At its core, this legislation intends to target phoenix operators and businesses which are at risk of ceasing production. In effect, this should assist small businesses in engaging with companies that are unlikely to ever fulfil their payment obligations.

“The government is trying to help small business and the parties which deal with those companies avoid incurring losses,” partner in restructuring and risk advisory at HLB Mann Judd, Todd Gammel, told Accountants Daily.

“The best outcome here is for small business to incorporate this into their risk management process, particularly for new customers. It enables them to assess the risk of supply to each customer, and change their terms accordingly,” he said.

“For example, if one of our clients received information that their customer was not talking to the ATO and had significant tax debt, we would suggest they shorten the trade terms,” he said.

However, it’s important that the law is regulated in the right spirit, to ensure small businesses which are likely to fulfil all service and tax obligations are not unnecessarily caught out.

“The ATO will need to be very careful around this, there’s potential exposure for them if they don’t adhere with their guidelines very clearly. If they get their timings wrong, this could result in a company having supply ceased. That could be justified if the business can’t pay for it, or are never going to be able to pay for it, or it may not be justified,” Mr Gammel said.

Mr Gammel sees this as another way that the ATO is being “innovative” in its data collection and transparency, in an effort to stamp out non-compliance.

“For example, we have had them contact us around clients who have sold large properties so they can get in first and look at the GST and understand all of that, plus the background and the CGT complications before the transaction is completed,” he said.

“Previously, we would’ve just lodged the return and had it come back to us,” he said.

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Katarina Taurian


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