Businesses of varying sizes and industries all have challenges. One of these is maintaining taxation obligations on a timely basis.
From July 2023, the ATO started to follow through on its powers to disclose overdue debts to credit reporting agencies. Around 22,000 businesses with a tax debt of at least $100,000 have been notified of the pending disclosure.
From this process, more than 9,000 businesses are expected to have their debts disclosed during 2023. The ATO expects to issue around 50,000 disclosure intent notices by the end of 2023–24 financial year.
Disclosure of business tax debts
The ATO has the ability to report tax debt where the following criteria applies:
- The business has an ABN and is not an excluded entity;
- The debt is $100,000 or more and is overdue by more than 90 days;
- There are no ATO payment arrangements in place to manage your tax debt; and
- There are no current Inspector-General of Taxation Ombudsman (IGTO) dealings.
Once a Notice of Intent is issued, a business will need to pay its debt or enter into an appropriate payment arrangement within 28 days to prevent disclosure.
A disclosed debt can impact a business’s ability to maintain fluid financial arrangements with lenders and suppliers alike.
Managing Tax Obligations
It can seem convenient or easy to use the ATO as a bank facility, though, for a number of reasons related to solvency and credit, it is important to be up to date with tax obligations.
Tax arrears are often the cause of a lack of planning and failure to understand the cycle of your business cash flow. Sure, unexpected events (such as bad debts or inventory delays) can happen, but in our experience, basic cash flow planning can help you prepare for or mitigate these issues.
Talk to your adviser or accountant about how to better understand the cycle of your cash flow. There may be an opportunity to improve or at least plan for it.
If you have a dispute or are having trouble meeting commitments, please see the ATO resources at the link below.
https://www.ato.gov.au/General/Paying-the-ATO
As a general rule - it is always better to keep the lines of communication open with the ATO, as they take the view that bad news is better than no news. An alternative strategy is to speak to your accountant or legal team for support or advice in acting on your behalf.
Contact MCP
1300 510 816 or your Finance Partner
enquiry@mcpfinancial.com.au