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New tax debt laws may 'act against' small business clients


The government is touting benefits for small business with its proposed business tax debt transparency laws, but some in the business of debt collection think the new rules may be counterproductive. 

By Jotham Lian13 minute read

Earlier this month, exposure draft legislation for the transparency of business tax debts was released, aiming to allow the ATO to disclose business tax debts to credit reporting bureaus where the businesses have not effectively engaged with the tax office to manage their debt.

The criteria for reporting tax debt information will depend if the entity has an ABN, a tax debt of which at least $10,000 is overdue by more than 90 days, and has not effectively engaged with the ATO to manage its tax debt.


Prushka Fast Debt Recovery chief executive Roger Mendelson believes that while the proposed legislation was well meaning, it would have little benefit for SMEs.

“SMEs, when they take on a job, they are eager to get the contract signed, and most of them have no effective credit checking processes in place, they aren't a member of Equifax, they just don't have the means, experience and knowledge to really check credit,” said Mr Mendelson.

“The only ones who ever check are the large businesses where it is just part of their process, when they set up a new account, they do credit checks and also they get alerts so if defaults get registered on a customer's name, they invariably will get an alert and they will put that customer on close watch and most of those customers will be SMEs.”

Instead, Mr Mendelson believes the new law will hit SMEs the hardest, should they fall afoul of the new law.

“[Larger organisations] will have an accounts department or an accountant and he's not going to let their relationship with the ATO lapse to the stage they are not responding in any way so invariably those companies that are reported on will be SMEs,” added Mr Mendelson.

“This may then act against the best interests of those SMEs which are the subject of the adverse reports because it is likely to make it much more difficult for them to obtain credit and may also result in credit facilities being withdrawn.”

However, firms like HLB Mann Judd are confident the laws will benefit small business if they are executed and regulated correctly. 

“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,” partner in restructuring and risk advisory at HLB Mann Judd, Todd Gammel, previously told Accountants Daily.

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New tax debt laws may 'act against' small business clients
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Jotham Lian

Jotham Lian


Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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