Tax

ATO to be given powers to tell credit reporting bureaus when small businesses don’t pay debts

Emma Koehn /

The federal government has released draft legislation to allow the Australian Taxation Office to tell credit reporting bureaus that a business is not actively trying to repay an outstanding tax debt.

Minister for Revenue and Financial Services Kelly O’Dwyer says the change will “remove the unfair advantage obtained by businesses that do not repay overdue tax debts”.

Originally outlined in the 2016-17 Mid Year Economic and Fiscal Outlook, the government estimated in December 2016 that the policy would cost $27 million over four years to implement, but would produce a revenue gain of $63 million over the forward estimates.

The aim of the legislation is to encourage more businesses to actively work with the tax office to repay their debts, with the explanatory memorandum for the bill claiming it will also allow credit providers “make a more complete
assessment of the credit worthiness of a business”.

The draft measures would apply to cases where a business with an Australian Business Number (ABN) has an outstanding tax debt of $10,000 or more, and this amount has been overdue for more than 90 days.

In these circumstances, the ATO would be able to disclose details of the business to credit agencies if the business was not actively working with the tax office to repay the debt.

A number of other criteria would have to be fulfilled before a report was made, including writing to the taxpayer 21 days in advance to tell them their information would be passed on to credit reporting bodies.

In a statement, Minister O’Dwyer said yesterday the move will encourage more businesses to speak directly with the ATO about their tax debts.

Council of Small Business Australia chief executive Peter Strong tells SmartCompany he is pleased there has been significant consultation with the small business community about the policy.

When it comes to dealing with small business, the ATO has also spent a lot of time working on their staff knowing about things like mental health issues among business owners,” Strong says.

However, regardless of whether this legislation is passed or not, the number one takeaway for all small businesses should be to discuss payment concerns with the tax office as soon as they arise, says Strong.

“I’d pick up the phone straightaway, before the ATO even calls you,” he says.

SMEs should not be hesitant to speak openly with the tax office about their situations, he says, highlighting that any businesses with concerns can also contact the Australian Small Business and Family Enterprise Ombudsman’s office.

Public submissions on the draft legislation are open until February 9 and can be lodged via this page. 

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.

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