Disclosure of tax debt: What does it mean for businesses facing cash flow difficulties?

Minister for Revenue and Financial Services Hon Kelly O’Dwyer MP has released draft legislation that would allow the Australian Tax Office (ATO) to disclosure of tax debt information to credit bureaus, when certain conditions are not met.

The draft legislation is designed to create a level playing field. It makes tax debt transparent, by enabling customers or suppliers to be able to see if a business is managing their taxation obligations or not.

Businesses with short term capital issues or other insolvency issues will be encouraged to be proactively engage with the ATO. Those businesses that don’t engage with the ATO or intentionally don’t pay their tax on time will be penalised.

Who will be effected by the disclosure of tax debt?

Businesses that:

  • have an ABN;
  • owe more than $10,000 to the Australian Tax Office;
  • are more than 90 days in the rears;
  • aren’t effectively engaged in managing their debt with the Australian Tax Office. If you have a client with an agreed upon repayment arraignment, they won’t be subject to reporting obligation.

How can you help clients with short term cash flow or insolvency?

To give your clients the best opportunity to try and recover from any insolvency or cash flow problems, engage with the Australian Tax Office early.

Timely lodging of BAS statements will become essential, even if there are short term cash flow difficulties or insolvency challenges.

Clients who ignore tax debt are going to create a bigger problem because their tax debt will become transparent.

You can read the ATO’s consultation paper here. Comments are due by Friday 9 February 2018.

Contact us here if you need some advice on how the proposed legislation might affect your clients or if you would like to discuss a business’ financial or operational circumstances.