Back in August 2019 (which feels about a million years ago given what’s happened since!) we brought you news of the ATO’s intention to report business tax debt to credit rating agencies, and warned of the serious problems that could cause businesses wanting to borrow money in the future.
And now, two years later, here we are: that proposal is now legislation.
What is the impact?
If you read or listen to the esteemed Robert Gottliebsen, enactment of this legislation is akin to the ATO dropping an “atomic bomb” on Australian small and medium-sized enterprises. His recent piece in The Australian is a very stark warning about the devastation this could cause for Australian SMEs – particularly in the covid and post-covid economic landscape.
He notes that: “Taxpayers will know they are about to be bombed when they receive a letter headed with words like: “Act now or your tax debt will be reported to credit reporting bureaus”.” And this is one of those ATO letters that you do not want to ignore.
Recovery needs cash
It is clear that access to credit is a key platform for business recovery and growth. This legislation has the ability to block businesses from accessing that capital. So it is critical to understand how you can avoid being reported to credit agencies. And thus avoid falling foul of this new legislation.
The simplest thing to understand is, as Mr Gottliebsen points out: “provided there are negotiations still taking place the bomb cannot be dropped on the taxpayer. [So] Start negotiating.”
Act now, protect your business
As a long-term tax debt advisor I urge you (or if you’re an accountant or advisor, I urge you to implore your clients) to engage immediately with the ATO if you know there is tax debt outstanding. Don’t wait to receive the letter. Just engage now.
When we ease out of the current covid restrictions (which we will!) access to credit will become immediately critical for many organisations. Just as importantly, having access to that credit over time will be the difference between surviving… and not.
You want to avoid a stain on your business or personal credit rating at all costs – and right now is the time to ensure you are IN ACTIVE CONTACT with the ATO about how and when you can negotiate to pay your debt.
Even if you haven’t received a letter but know you have debt, you should do something about it now… as Robert’s article reminds us, it is possible “the letters will not be received by the taxpayer because of incorrect mail or email addresses”.
Now is the time to negotiate favourable terms. If you know you have business tax debt, right now is the time to engage with the Australian Tax Office to make sure you’re in a position to recover and grow, with the ability to access credit.
If you need a hand or even just want to chat about your options, please reach out to us at Tax Assure. We liaise with the ATO daily to help businesses and individuals with tax debt. We’d be delighted to help you or your clients.