The government’s plan to introduce new laws to allow the disclosure of business tax debts has hit a hurdle, with key industry voices raising concerns over the lack of sufficient safeguards.
Senate inquiry hears concerns around tax debt disclosure proposal
The Economics Legislation Committee is currently mulling over submissions made in respect to the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, which contains a measure seeking to allow the ATO to disclose business tax debts to credit reporting bureaus.
The disclosure of tax debts will impact those who have one or more tax debts, the total of which is at least $100,000, that have been overdue for more than 90 days.
Entities that do not effectively engage the ATO in respect of the tax debt will be up for disclosure.
Tax debts will include income tax debts, activity statement debts, superannuation debts, fringe benefits tax debts, and penalties and interest charges.
The ATO’s consultation paper on how it will administer the measure has since been released, detailing safeguards, including providing a 21-day notice period to businesses to take action on their debt before the debt information is actually reported.
In its submission, the Tax Institute said it was “strongly opposed” to the current drafting of the measure, noting several issues that needed to be addressed.
“In our opinion, the current proposal does not provide adequate checks and balances,” said Tim Neilson, president of the Tax Institute.
“In New Zealand, all the thresholds are higher than those proposed in Australia. For example, debts need to be outstanding for 12 months and notice periods are longer. We question why the proposed Australian thresholds are all much lower than New Zealand.”
Likewise, CPA Australia’s head of policy and advocacy, Dr Gary Pflugrath, said it was worth considering raising the 90-day threshold to a minimum of 120 days.
“Due to the debt payment processes of many larger businesses, the 90-day threshold is a comparatively short period, especially for small businesses,” Dr Pflugrath said.
“Almost half of invoices are paid late and many small businesses are paid 60 or more days after the invoice is issued. This has a significant effect on the ability to pay tax liabilities.
“The quarterly business activity statement (BAS) cycle means that, in effect, if a taxpayer has not paid their BAS liabilities or entered into a payment arrangement prior to the lodgement of the next BAS, the debt will be disclosed to the CRB. This may be a significant, albeit often intermittent, challenge for many small businesses.”
The Inspector-General of Taxation and Taxation Ombudsman (IGTO) also made 17 recommendations aimed at improving the legislation, including calling for the 21-day notice period to be increased.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell also criticised the legislation, noting that “various understandings reached in that consultation on procedural conditions and safeguards are not reflected in the legislation”.
The Economics Legislation Committee will now consider the submissions and present its report to the government by 5 September.