ATO to record tax debts with credit reporting bureaus

From 28 October 2019 the Australian Taxation Office (ATO) gained legislative power to list business tax debt default information with registered credit reporting bureaus. A credit default will remain on the business’s file for five years and may cause support from financiers being withdrawn and supplier credit stopped.

Debt recovery strategy

This is part of the ATO’s new strategy to recover overdue tax and to encourage businesses to enter into arrangements with the ATO for the payment of overdue amounts. It is also intended to remove the unfair advantage for businesses that do not pay their tax on time. Failure to lodge and general interest charge penalties, including personal liability of directors, rarely affect a business continuing to trade. This means that ATO debt is often ignored and increases until the ATO pursue legal proceedings.

Which debts are involved?

Business debts disclosed to creditor reporting bureaus will involve:

• Businesses with an Australian business number (ABN) which are not an ‘excluded entity’ (a deductible gift recipient, registered charity, a government entity, and a complying superannuation entity);
• Businesses whose tax debts total at least $100,000 and which are overdue by 90 days or more;
• Businesses who have not engaged with the ATO to manage their tax debt;
• Business who have not made a complaint being considered by the Inspector-General of Taxation about “the proposed reporting of the entity’s tax debt information”.

Notice to be given before listing

Before the report is lodged, the ATO must notify the business in writing and give them 28 days to engage with the ATO to manage the tax debt.

ATO intends to extend the scheme

The ATO intends to extend the reporting soon to other entity types such as partnerships, trusts and sole traders.

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Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.