Responding to a question on notice during a Senate committee inquiry, the ATO has revealed that under the proposed $100,000 tax debt threshold, around 5,000 businesses could potentially be reported.
The previous proposed threshold for disclosure was $10,000 and would have potentially impacted around 38,000 businesses, according to the Tax Office’s analysis.
Under the current proposal, 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.
Despite the 5,000 figure, the ATO stressed that it intended to “commence slowly”, initially focusing on a small number of higher-risk companies.
ATO chief service delivery officer Melinda Smith told the Economics Legislation Committee that the measure was designed as an engagement tool, citing the New Zealand experience.
“Fifty companies, even during the consultation phase in New Zealand, engaged and paid their outstanding debts in part or in full.
“In the instance in New Zealand, where they then sent a letter to them saying, ‘The next step is going to be that we’re going to report you to a credit rating bureau’… they’ve sent 28 of those letters out in three years. Only 28. They’ve had 50 engage and pay in full or partly. Of those 28, 18 are now in a payment plan.
“The feedback has been overwhelmingly: ‘This hasn’t cost us a fortune. You’ve talked to me about my hardship.’ One of our safeguards is that, if you’re a business that actually has had unforeseen circumstances, we want to work with you, because it’s no good just putting pressure on a business that can’t afford to pay it. We need to work with them, and we’ve done that time and time again, assisting businesses.”
The Economics Legislation Committee is currently considering submissions and will present its report to the government by 5 September.
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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.