As reported in a previous article, in late 2019 the Australian Taxation Office (ATO) was given the power to release information to credit reporting agencies concerning the tax debts of a business in certain circumstances. Those circumstances are:
- 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; and
- 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 and Taxation Ombudsman (Inspector-General).
More information can be found here.
We understand that the ATO has not yet used this power (presumably because of the pandemic) but given the ballooning ATO debt, we anticipate this tool may well be used extensively in the near future.
Before releasing information to credit reporting agencies, the ATO must first give the business 28 days’ notice of their intention to do so.
The 28 day period is an important safety net for the business, as once information is released to credit reporting agencies, it is usually very difficult to amend. Such information on a business’ credit file may have significant impacts on a business’ ability to obtain funding or open further credit accounts.
Reporting tax debt information to credit reporting agencies may undermine the ATO’s collection efforts as businesses often seek funding against their assets to repay the ATO.
There are two ways in which a business can avoid having their overdue tax debts reported:
As noted above, one of the criteria which must be met for information to be released is that the business is not engaging with the ATO. If a business receives a formal notice, they should immediately contact their accountant or the ATO directly to attempt to resolve the overdue debts.
A further option is to make a complaint to the Inspector-General concerning the proposed reporting of overdue tax debts. The Inspector-General’s website has been updated to provide a streamlined process for the making of such complaints.
Given the financial impact of the pandemic, many businesses have had no available option but to defer payment of their tax debts. Individuals or companies with overdue tax debts of greater than $100,000 that are not already engaging with the ATO should therefore be on the lookout for such notices of intention and act quickly.
As many businesses use their accountant’s office as their registered office, accountants should also be on the lookout for such notices and ensure that they are quickly brought to the attention of the business owner.