Accountants warned on 'very serious' tax debt laws

Despite some believing a degree of leniency will be applicable, accountants have been urged to help clients get their tax debts under control ahead of changes to the ATO’s ability to disclose tax debt information to credit reporting bureaus, or risk serious and inescapable consequences.

The 2016-17 Mid-Year Economic and Fiscal Outlook included two key tax changes, one of which allows the ATO to disclose to credit reporting bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts from 1 July, 2017.

The measure will initially only apply to businesses with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue.

CreditorWatch managing director Colin Porter said businesses that fail to address outstanding tax debts prior to FY2017-18 should expect their credit rating to be adversely affected.

“The information that's being disclosed is tax debt over the value of $10,000, which is actually in default,” Mr Porter told Accountants Daily.

“Then it’s on their commercial credit file for five years. It’s a very serious default.”

Mr Porter believes that accountants should be helping clients who are struggling with tax debt to get it under control before 1 July.

“What I’d be saying to accountants is that from now on, if their clients are struggling they need to ensure that they're in communication with the Tax Office, full stop,” he said.

“They also need to be meeting their obligations, because there will be serious ramifications if they do have a default registered against that business. It will put their client in a precarious position.”

Mr Porter added that a client who is in debt to the ATO will require more of the accountant's work in the short term, but that there is a risk the client will be lost if the company gets wound up.

“It will probably be a little bit more work for accountants, and potentially if the company is wound up they'll obviously be removed and it will go to an administrator to actually manage that or a receiver to manage that business, so it's not a good thing for accountants,” he said.

“They should be advising their clients to ensure that they are maintaining their tax, making sure that they do have the reserves to actually cover their tax expenses and communicating with the Tax Office at all times.”

The ATO may also use accountants as a way of contacting unreachable companies, according to Mr Porter.

“Accountants will probably find that the Tax Office may call them to discuss what's going on if they fail to receive communication from the business,” he said.

 

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