Federal Government considers giving new powers to ATO to disclose small business tax debts.

As per a new proposal credit reporting agencies such as Veda & Dun & Bradstreet would be disclosed with payment defaults to ATO Debts. There could be large scale implications if such a change is implemented.

The Federal government is currently considering a proposal to give the ATO new powers to disclose tax debts of small businesses to credit reporting agencies in order to decrease the tax debts by small business by forcing small business owners to pay their tax debt in a timely manner.

The proposal is set to commence on 1st of July 2017 and the focus will be small business owners who have an Australian Business Number and have an outstanding tax debt of more than $10,000 which is at least 90 days overdue (Debts under a payment arrangement or debts which are genuinely in dispute will not be reported). Small businesses owe the majority of the tax debt in the economy at 65.2%. This is the main reason why ATO are focusing on small businesses.

The incident when there was a dispute between Small businesses and the ATO caused the ATO to come under fire when many small business owners were made to feel intimidated, made bankrupt and even some contemplating suicide. Kate Carnell, the Small Business and Family Enterprise ombudsman has raised concern about the potential effects of giving the ATO the power to disclose such information to credit agencies.

Ms Carnell stated that there are a lot of issues that should be taken into consideration before the ATO decides to publicise a small business debt, some of these issues being the defaulting on small business loans even if they were paid on time. Such an event may also adversely affect the trading of the business and affect their cash flow. There is also a high concern about the mental health condition of business owners that such an event may cause.

Due to the concerns and the risks possibly outweighing the benefits, the ATO is consulting with the community, industry groups and Australian Small Business and Family Enterprise Ombudsman (ASBFEO) to ensure effective implementation.

An ATO spokesperson has mentioned that the ATO are not obliged to disclose the information but will have the discretion to disclose tax debt information to credit reporting agencies. ATO understands how much of an issue these may cause and would want to work with tax payers to help with their debt, for example: setting up a payment plan that would be suitable for the taxpayer’s current situation.

If you are in a tax debt and need any assistance in setting up a payment plan, feel free to give us a call on 03 8609 1889 and one of our friendly consultant will set one up for you.