Unpaid Tax Liabilities with ATO

Over recent months, we have seen the ATO vigorously pursue individuals and small business for unpaid tax debts.

From 1 July 2017, the ATO will be able to disclose to the Credit Reporting Agencies the names of taxpayers who have unpaid taxation liabilities. This means that for businesses with tax debts, the true financial position of the business will become available to the public.

Ignoring the ATO can in some instances be to your detriment

At the outset, the threshold for this reporting will be restricted to those ABN’s who have tax debts exceeding $10,000 and with the debt outstanding for at least 90 days. It is uncertain at this stage as to whether the ATO is obligated to notify the taxpayer in any way before reporting the debt to the CRBs.

How does it affect you?

  • For those business with large tax debts this will mean that your suppliers will have access to this information and may reassess their terms with you, potentially refusing to supply.
  • For those business who supply goods, you will now have access to this information about your customers and may need to reassess your terms with them if you feel necessary.

And for those businesses who want to borrow money, it is common knowledge the impact that a default on your credit listing has.

Worst case scenario – for businesses with large tax debts who are highly dependent on suppliers for the running of their business, this could potentially result in suppliers refusing trade credit and consequently the business failing as the business becomes unable to continue.

Can this be addressed?

  • If your business does fall into this tax liability category you should organise a payment arrangement with the ATO at the very least;
  • Consider the structuring of your business entity(ies);
  • If you’re in the business of supplying goods, be aware that this information will soon become available to you and should be used when considering credit terms for your trade creditors.