New debt reporting powers afforded to the ATO in 2019, which later took a backseat to the pandemic, have now taken effect and could see businesses that owe more than $100,000 in tax and are more than 90 days in arrears without a payment plan be reported to credit agencies.
Craig Michie, a senior executive at non-bank lender ScotPac, said he and his colleagues have started to see the ATO issue letters of intent.
“When the pandemic hit, the Australian Taxation Office understandably put its powers on hold due to COVID-19’s massive impact on the business sector,” Mr Michie said.
“Now, many of our accounting partners have indicated the ATO is again sending SMEs notification of intent to start reporting their outstanding tax debts to credit bureaus.”
The Tax Office told Accountants Daily in August that a small but undisclosed number of businesses had now received the intent to disclose letters, but confirmed that it had yet to disclose any tax debt information to credit reporting bureaus.
Mr Michie said it’s important that businesses get out in front of the ATO crackdown and seek the advice of an agent, while maintaining communication with creditors.
“The worst thing a business can do is stop communicating with creditors as it makes creditors more anxious,” Mr Michie said.
“Even if you can’t pay now but have a pipeline of work that will provide cashflow, share those details with creditors and link your payment to that future cashflow.
“SMEs should do this all the time, but it is especially important in the current business environment.”
Mr Michie also warned against using the ATO as an alternative line of credit, as scores of businesses have been known to. He said establishing a sustainable funding structure has become critical.
“In the past, business owners have sometimes used the ATO like a ‘line of credit’ by not paying their ATO commitments on time,” Mr Michie said.
“Now, if business owners take this road, it is much more likely to have an adverse impact on their credit ratings and credit insurance limits, and this would make it more difficult to maintain or extend credit terms with suppliers.
“The ATO is no longer prepared to be viewed as a line of credit.”
John Buckley is a journalist at Accountants Daily.
Before joining the team in 2021, John worked at The Sydney Morning Herald. His reporting has featured in a range of outlets including The Washington Post, The Age, and The Saturday Paper.