The Federal Government is legislating to allow the Australian Taxation Office (ATO) to disclose information on businesses tax debts to registered credit reporting bureaus (CRBs). The legislation is currently in draft form but expected to be enacted prior to 30th June 2018.
The objective of the legislation is three-fold:
- Firstly, to encourage businesses to engage with the ATO to manage their tax debts.
- Secondly, to provide the business community with improved transparency so they can make an informed decision about the risks involved in trading with a business with large tax debts.
- Thirdly, to reduce the unfair advantage gained by businesses that do not pay their tax on time.
The ATO will only disclose tax debt information to a CRB if the business meets all of the following criteria:
- It has an Australian Business Number (ABN);
- It has a tax debt, of which at least $10,000 is overdue by more than 90 days; and
- It is not effectively engaging with the ATO to manage its tax debt, i.e. it has failed to establish, and comply with, a payment plan with the ATO.
CRBs will include the tax debt information in their credit reports. Businesses, banks and landlords purchase these reports to make an informed decision on the credit-worthiness of a business.
This legislation is a positive for taxpaying businesses, as it will penalise businesses who don’t pay their tax debts on time. Too many businesses look at their ATO tax debts as cash flow to fund their business and lifestyle. There should be less of this in the future.