ATO Business Tax Debts to be Reported to Credit Agencies from 1 July 2017

Commencing 1 July 2017, The ATO will be reporting business tax debt to credit agencies if an amount of business debt is over $10,000 and the business has not effectively engaged with the ATO to manage those debts. This new power for the ATO is a Government attempt to reduce the current $19 Billion amount of overdue tax.

It will apply only to businesses with an Australian Business Number who have a tax debt of more than $10,000 which is at least 90 days overdue. The ATO have indicated they will only use this power if the business has made no attempt to engage with them and make a payment plan, after all ATO final warning notices and garnishee notices have been sent.

A tax debt listing on your business credit report remains for 5 years and cannot be removed, even if the debt is paid, unless the business is able to prove that the debt was listed in error.

Once this listing is on a credit report, it can be extremely difficult for a business or the directors of a business to obtain financial funding from banks. If a lender does decide to provide funding, it will be at a much higher interest rate as the business and its directors are considered a higher risk of defaulting on loan repayments. Other businesses may also refuse to offer you credit and establishing trade accounts with suppliers can become a lot more difficult.

Businesses who engage with the ATO and make payment plans to reduce debt owed or who are disputing their tax debts will not be reported to Credit Agencies. The ATO will notify a business if they plan to report their debt and advise them that they have 21 days to respond before their tax debt information is reported.

If your business tax debt is over $10,000, the best thing you can do is to engage with the ATO to ensure your credit file is not compromised.