The Australian Taxation Office (ATO) has taken a significant step towards enhancing transparency and promoting fair business practices with its recent decision to start to disclose business tax debt information to credit reporting bureaus (CRBs).
This move is claimed to be aimed at supporting businesses in making more informed decisions, encouraging engagement with the ATO to manage tax debts effectively and to minimise the financial edge that some businesses may gain by delaying tax payments.
The criteria for reporting tax debts
Under the new policy, the ATO will report the tax debt information of businesses that meet specific criteria to CRBs. To be eligible for reporting, a business must:
- have an Australian Business Number (ABN),
- possess one or more tax debts of which at least $100,000
- Tax debt is overdue by more than 90 days
- Not be actively engaged with the ATO in managing their tax debt.
Exempt from this reporting is entities such as deductible gift recipients, complying superannuation funds, registered charities, and government entities.
Engagement with the ATO: a key to avoiding disclosure
The ATO emphasises the importance of engagement to manage tax debts. If your entity has in place a payment plan, applied for tax debt release, or have an active review or complaint regarding the tax decision—the debt information will not be reported, regardless of the debt amount.
Getting advice on how to handle your tax debt with the ATO will be crucial in this information being made publicly available.
Notice of intent to disclose
Businesses on the brink of having their tax debt information disclosed will receive a written notice from the ATO. This notice serves as a final opportunity to take corrective action within 28 days, highlighting the ATO's intent to support businesses in resolving their tax debts before taking the significant step of reporting to CRBs.
If you receive a notice from the ATO you have several options. Either pay the outstanding amount, seek out a payment plan or dispute the amount owing.
Legislation and privacy concerns
The legislation backing this initiative aims to level the playing field among businesses by making overdue tax debts more visible. This move is supported by stringent privacy measures, ensuring that only CRBs registered with the ATO that have signed a Deed of Agreement are privy to the disclosed tax debt information.
Who can indirectly access the information?
While the information will directly only be available to CRBs, indirectly, any of the following entities will be able to indirectly access the information:
- Financial institutions
- Banks
- Credit Unions, Building Societies
- Retailer that issues credit cards
- An organisation that supplies goods and services where payment is deferred for 7 days or more (eg. telecommunications carrier, energy or water utility company)
- An organisation that supplies credit for the hiring, leasing or renting of goods
- Mortgage Insurer
- Trade Insurer
- Debt collectors acting as an agent for a credit provider
Business reactions and the road ahead
The ATO's decision has sparked a mix of reactions from the business community. Whilst the ATO is attempting to reduce the amount of tax outstanding, which has doubled since COVID-19. Business advocates have expressed their concerns about the potential impact on businesses struggling in the aftermath of the pandemic and extended disruptions to business.
Either way it underscores the importance of early and proactive engagement with the ATO to manage tax obligations effectively.
We can help you actively manage your tax debts and provide clear advice and support when dealing with the ATO.
The onus is on business owners to engage with the ATO or to seek advice about disputing their tax assessments. We have successfully helped clients reduce their tax liabilities as well as manage tax debt obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.