The Australian Taxation Office (ATO) will be empowered to report a business’s overdue tax debts to credit reporting bureaus under draft legislation released by Minister for Revenue and Financial Services, Kelly O’Dwyer.
The legislation, which – together with explanatory material – is now available for public comment, will require a business to “effectively engage” with the ATO to pay their tax debts in a “timely manner”. In circumstances where a business’s tax debt is at least $10,000 and this has been overdue for more than 90 days, the ATO would be authorised to report this information to the bureaus following consultation with the Inspector General of Taxation.
According to Minister O’Dwyer, by making overdue tax debts more visible, the legislation will provide businesses and credit providers with “a more complete assessment of the creditworthiness of a business”.
“This will reduce the unfair advantage obtained by businesses that do not pay overdue tax debts, and encourage businesses to engage with the ATO to manage their tax debt,” she said.
The draft legislation has been welcomed by Colin Porter, the founder and CEO of SME-centric credit bureau CreditorWatch. He described the legislation as “fair, reasonable and transparent”, adding that he commenced discussions with the ATO for this outcome “more than two years ago”.
“The ATO, which is Australia’s biggest and most flexible creditor, will be taking steps to ensure businesses are treated fairly,” he told Dynamic Business. “We expect there won’t be a knee-jerk reaction if a business hasn’t paid its tax; instead, the ATO will consult with them in an effort to get the best possible outcome.
“The only businesses that should be concerned are those in financial distress and whose bad debt impacts not just other businesses but the economy. Although there will be businesses that wind up due to this legislation, those businesses that do would have eventually wound up anyway. The legislation just speeds up the process, limiting the flow-on effect bad debt has on good businesses. In this sense, the legislation serves as damage control.”
The exposure draft legislation and explanatory materials are available on the Treasury website, and interested stakeholders are encouraged to provide their views by Friday 9 February 2018.
Submissions can be emailed to firstname.lastname@example.org during the consultation period.
Related: Let’s Talk… Late Payments