A recent agreement between credit reporting agency, Equifax, and the Australian Tax Office (ATO), will see business tax debt information made available as part of the business’ commercial credit reports.

To date, the only other company that received business tax debt information from the ATO was CreditorWatch Pty Ltd, so this latest agreement will now see that information available to a much wider range of businesses and organisations.

What does the Disclosure of Business Tax Debts mean for Businesses?

If you keep well on top of your business tax obligations and payments with the ATO, then this decision will likely have little effect on you and your business dealings.

However, if you have a current business tax debt with the ATO (that meets the criteria outlined below), then this information being made available on your credit reports could have a significant impact when it comes to borrowing and seeking financial support or investment.

As noted by Equifax’s General Manager, Scott Mason, in recent communications regarding the new agreement, “Understanding whether a business has significant and overdue tax debts is a critical warning sign of credit risk…it’s widely understood that tax debts are often the last ‘bill’ that businesses typically pay. This means that outstanding tax debt indicates either an inability to pay, or a willful decision not to pay tax – both indicators of risk that our customers will now have greater oversight of.”

In other words, if you have a business tax debt, lenders and other financial agencies are likely to view your business as an increased risk.

Criteria for Reporting Business Tax Debts

The ATO’s criteria for determining which business tax debts are reported to credit reporting bureaus (CRBs) is as follows:

  • You have an Australian business number (ABN) and are not an excluded entity.
  • You have one or more tax debts and at least $100,000 is overdue by more than 90 days.
  • You are not engaging with the ATO to manage your tax debt.
  • You don’t have an active complaint with the Inspector-General of Taxation Ombudsman (IGTO) about our intent to report your tax debt information.

An excluded entity is either a:

  • deductible gift recipient
  • complying superannuation fund
  • registered charity
  • government entity

There are exceptional circumstances under which the ATO may decide not to report your tax debt information to CRBs. Such circumstances may include, but are not limited to:

  • family tragedy
  • serious illness
  • impacts of natural disasters

Exceptional circumstances are considered on a case-by-case basis and generally do not include cash flow issues or financial hardship.

What should I do if I have Business Tax Debts with the ATO?

If you have any kind of business tax debt with the ATO, the number one thing that you should do is contact your accountant or the ATO directly as soon as possible to discuss your options. The absolute worst thing that you can do, is to do nothing. This will only compound the problem and make it worse. Keeping on top of your tax debt, and where needed reaching out for a solution/assistance sooner rather than later, will not only help in the short term, but will also go a long way to keeping your tax debt at a manageable level ongoing. In turn, this will keep your tax debt from potentially impacting your credit report and score and lowering your risk profile for any future ventures or assistance that you might need.

Engage with the ATO to Manage your Debts

The 3rd criteria for having your business debt reported to CRBs is “not engaging with the ATO to manage your tax debt”. So even if you have a business tax debt of more than $100,000, you can avoid the debt being reported to CRBs by contacting and effectively engaging with the ATO.

You are determined as effectively engaging with the ATO regarding your business tax debt, if you have:

  • a payment plan and you are complying with the terms of the arrangement
  • applied for release from the tax debt
  • an active objection against a taxation decision to which the tax debt relates
  • an active review with the Administrative Appeals Tribunal (AAT) or an active appeal to the Court
  • an active review with the AAT of a reviewable decision which may affect the amount of a non-complying superannuation fund’s tax debt with the relevant regulator
  • an active complaint with the IGTO in relation to the tax debt.

Essentially, if you have initiated something with regards to your tax debt, as opposed to doing nothing then your business tax debt information will not be disclosed.

How will I know if my Business Tax Debt will be disclosed?

If you meet the above criteria for reporting business tax debts, the ATO will provide written notice of their intention to disclose your business tax debt.

The notice will tell you:

  • about the ATO’s intent to report your tax debt information to CRBs
  • that you meet the criteria for reporting
  • the information the ATO intends to report to the CRBs
  • what steps you can take to avoid your tax debt information being reported
  • that you have 28 days from receiving the notice to take the necessary action.

Equifax’s agreement with the ATO is yet another reason why businesses should seek to take action regarding their business tax debts. No longer does an ATO tax debt only affect your position with the ATO, it can have much wider reaching effects in regards to your credit profile.

Now, perhaps more so than ever, it is important to initiate engagement with the ATO so that you can have the best chance of maintaining a low risk credit profile.

The expert team of accountants and tax lawyers at The Quinn Group can help you manage your business tax debts and get back on track. Contact us on 02 9223 9166 or submit an online enquiry to arrange an appointment to discuss your individual situation.

An agreement between credit reporting agency, Equifax, and the ATO, will see business tax debt information made available on commercial credit reports.