For many businesses, ATO debt can be a serious issue. At the end of 2020 ATO debt stood at around 34 billion – this is its largest ever debt.
Change in legislation means unpaid business tax is reported to credit agencies.
In 2018, legislation was passed that empowered the Australian Tax Office to start reporting unpaid business tax debts to credit reporting agencies, making it possible for such information to be included in business credit reports. Under the new legislation, the ATO can report Australian businesses that owe more than $100,000 that is more than 90 days overdue and do not have a payment plan in place or being negotiated. While this has caused concern for many, some people believe that it levels the playing field by creating greater transparency about the financial health of businesses.
Business tax debt captured in the tax debt disclosure threshold includes;
- income tax debts
- activity statement debts
- superannuation debts
- fringe benefit debt
- penalties and interest charges
Outside of reporting to Credit Agencies, what else can the ATO do?
- Turn your ATO debt over to external debt collection agencies – if you cannot pay or reach an agreement about paying your debts.
- Garnishee Notices – with a Garnishee Notice, the ATO can get a person or business that holds money for you (such as your bank), or will hold money for you in the future, to pay them directly to reduce your debt
- Director Penalty Notice – with a Director Penalty Notice, a director can incur penalties equal to the amount of the PAYG withholding liabilities and superannuation guarantee charges that have not been paid. The ATO can issue the Director Penalty Notice which makes it possible to start legal proceedings to recover the penalty.
If the ATO is unsuccessful in these attempts at debt collection, it can take other steps, including:
- Filing a claim or summons
- Filing a creditor’s petition to make you bankrupt.
- Issuing a statutory demand requiring a company to pay its entire debt or enter a payment plan with 21 days.
- Taking action to wind up a company if it hasn’t paid its debts or entered into a payment plan.
If you are in business, staying on top of your tax debt can be challenging. ATO payment plans are not always suitable for businesses and sometimes, just deferring the issue compounds the problem.
One option is to refinance your tax debt.
There are numerous ways to do this.
We have helped many businesses bring their tax debt and cash flow under control.
Do not bury your head in the sand. Call us today to discuss the options that are available to you ph. 1300 005 409.