ATO starts issuing notice of intention to report unmanaged debt.
The Australian Tax Office (ATO) has started issuing a notice of intention to report businesses' outstanding debt to credit reporting bureaus if attempts to manage the debt are not made within 28 days.
After last year's pause on debt collection, the ATO is now looking at collecting debts that were accrued in 2019 and 2020. This may prove challenging with Australia’s latest lockdown measures. It is likely this pressure to collect the debt will put companies and business owners in more financial distress.
What is a Notice of Intention to Disclose?
Last year saw the introduction of a law which gives the ATO the power to disclose businesses tax debts of $100,000 or more to a credit reporting bureau. A "credit reporting bureau" is a body that collects and shares data with credit providers about a borrower’s financial history, such as Experian, Equifax or illion.
Unpaid tax debt includes outstanding income tax, activity statements, fringe benefits tax, superannuation guarantee debts and more.
How much is owed to the ATO?
For the 2019-2020 financial year, there is more than $53 billion worth of debt owed to the ATO. The debt owed by individuals, businesses, and super funds, also known as "collectable debt “, is $34.1 billion. This is an increase of almost 30% that was reported in the previous tax year.
The ATO has reported that small businesses were the most at risk and owe the majority of this collectable debt.
Impact on Small Businesses
The large debt owed to the ATO, which is three times greater than that after the 2008 Global Financial Crisis, increases the pressure on the tax office to reduce this amount as soon as possible.
With the rising pressure to recover the outstanding tax debts sooner, and the ability to report any unmanaged debt to the credit reporting bureaus, the ATO are focussing on small business. This means the future of small business is under strain, especially when they have been impacted by the current COVID-19 trading restrictions.
What to do if you receive a notice of intention from the ATO?
Anyone who receives a notice of intention to disclose MUST act as soon as possible if they wish to avoid their tax debt being reported to the credit reporting bureau.
The letters outline what the taxpayer can do to avoid the debt being reported. It is encouraged that they do not ignore the notice and talk to the ATO either directly or through a trustworthy advisor.
It is critical for small businesses to take notice of the ATO's notice of intention to disclose. You may be able to avoid negative consequences by taking care of your tax debt within 28 days, or sooner if you have a payment plan with the ATO.
What to do now?
If you find yourself receiving a notice from the Australian Tax Office, don’t panic !
We can help you come up with an actionable plan that will not only satisfy your obligations but also save you time and money on credit reporting penalties as well.
Contact our team today at 1300 631 710 so we can discuss how we might best serve your needs.
