By Daniel Smith
02 September 2019
The measure seeking to allow the Australian Taxation Office (ATO) to disclose business tax debts to credit reporting bureaus has been revived, with Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, introduced into the House of Representatives late July 2019.
The original measure, which lapsed with the calling of the election earlier this year, has been slightly tweaked from the original proposal.
Applicable to entities that are effectively carrying on a business, the disclosure of unpaid tax debts will impact those entities carrying on a business, with a liability of at least $100,000, that has been overdue for more than 90 days. This increases the value of the debt from $10,000 which was originally proposed.
The intent of the measure allowing the ATO to disclose such information is to support more informed decision-making within the business community and banking and finance industry, by making overdue tax debts more visible.
The measure is also introduced to encourage taxpayers to engage with the ATO to manage their tax debts and reduce the unfair advantage obtained by businesses that do not pay their tax on time.
The impact for you and your business is that the reporting of overdue tax liabilities, above $100,000 and over 90 days old, will now be reported to credit reporting bureaus, and once reported, the nature of the liability and non or late payment will adversely affect your credit rating, making it more difficult and more costly to obtain finance and credit.
If, however, you are in the process of engaging with the ATO to manage a tax debt or taking action in accordance with the law to dispute the debt, that tax debt will not be included in the above.
It has never been more important to ensure that your cash flow and ability to meet ATO payments are monitored and managed effectively, this can be done by:
- Ensuring that your regular management accounts are up to date, and reviewed regularly e.g. monthly;
- Having a good weekly, fortnightly and monthly cash flow projection, and planning tool;
- Having a budget;
- Preparing a three-way forecast, forecasting your profit, balance sheet and cash flow;
- Monitoring and reviewing your accounts receivable, and reviewing your accounts receivable terms, to assist with timely collection of accounts; and
- Plans to manage your ATO debts, including taking upfront action to enter into payment arrangements, where debt cannot be paid on time.
This measure will, however, enable you to more accurately conduct your own credit check, and risk assessment of your own customers and potential customers in order to decide payment terms or whether to engage in business with them, as it will be easier for you to discover if your potential client has unpaid tax debt, helping you in avoiding doing business with high risk of being a bad debt.
PKF is regularly engaged to provide assistance and advice, with improving cash flow, ATO debt and payment arrangement negotiations. If you would like any assistance, please get in contact with us today.