The Australian Taxation Office (ATO) will commence reporting unpaid business tax debts to credit reporting bureaus (CRBs) in certain circumstances. The ATO will issue impacted businesses with a notice of intent if they plan on reporting these debts to CRBs. Businesses will have 28 days to take the relevant action to prevent the ATO from disclosing this information to CRBs.
The ATO may report unpaid business tax debts to CRBs if the following conditions are met:
- The business has an Australian business number (ABN) and is not an excluded entity.
- The business has one or more tax debts, of which at least $100,000 is overdue by more than 90 days.
- The business is not engaging with the ATO to manage their tax debt.
- The business does not have an ongoing complaint about the proposed reporting of their entity's tax debt information with the Inspector-General of Taxation Ombudsman.
The following entities are excluded from these provisions:
- deductible gift recipients
- complying superannuation funds
- registered charities
- government entities.
Tax debts includes all ATO debts including PAYG, GST and income tax.
Whilst these measures applied from February 2020, the ATO has taken a lenient approach due to the impacts of COVID-19. With businesses starting to recover across Australia, we expect the ATO to ramp up their debt collection activities over the coming months.
If a business has overdue debt for more than 90 days, the ATO will not automatically report the information to CRBs - these measures were implemented to encourage taxpayers to engage with the ATO and come up with solutions to manage and repay their business debts e.g. payment plans. Therefore, it is critical to actively engage with the ATO in a timely manner given the risk of it being reporting to CRBs will impact upon the business' credit rating and therefore impacts their ability to enter into financing arrangements.
This article is issued as general commentary - please contact us about your specific circumstances.