ATO: What you need to know about unpaid tax liabilities

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Since July 2017, the Australian Taxation Office (ATO) has had the authority to share the names of taxpayers who have unpaid liabilities with Credit Reporting Agencies. Although it applies to all types of taxpayers, businesses are the ones that are most affected by this new law. As a business owner, this measure comes with certain implications that you need to understand so as to avoid finding yourself in an untenable position. If the ATO shares your information with credit reporting agencies, that information will become public, and this can put a black mark on your business. If you have unpaid tax liabilities, here is what you need to know about this new regulation.


Do not disregard any communication from the ATO

The purpose of this regulation is not to punish or to shame businesses, it is to improve tax compliance. This means that the ATO is more likely to share your information with CRBs if you disregard any notices or communications from them. For starters, the ATO only shares information about entities that have Australian Business Numbers and tax debts that total more than $10,000. Also, the debt has to be overdue for 90 days or more for your information to be sent out. These conditions are designed to give businesses some wiggle room. The ATO will notify a business if they meet the reporting criteria, advising that they have 21 days to respond before their tax debt information is reported to CRBs. Businesses which are effectively engaging with the ATO to manage their tax debts will not have their tax debt information reported to CRBs. Watch out for any communication from them to avoid any surprises.

How your business will be affected

If your business owes a large tax debt and your information is available to the public, it’s likely to affect you negatively. First of all, when your suppliers find out about your debt, they will start to doubt your ability to meet your obligations to them. They may, therefore, try to renegotiate the terms of your contract in a bid to protect their own interests, and this will most likely be to the detriment of your business. In some cases, your suppliers may decide to terminate their relationship with your business if they feel that they can’t deal with the risk.

On the flip side, if you are a supplier, you will be able to know if your customers have large tax debts, and you can take the necessary steps to re-evaluate the terms of your agreement so as to protect your own business. As a supplier, it’s in your best interest to use this information to get the best deals for your business and to reduce your risks.

You should be particularly careful about allowing your unpaid tax liability information to get into the hands of CRBs if you are servicing a loan, or if you intend to borrow money in the future. Any default on your credit listing, even a tax default, can affect the ability of your business to take out new loans, and it may cause current creditors to be more overbearing.

What you can do to avoid getting listed

If your business already has unpaid tax liabilities, you should contact the ATO and try to work out a payment arrangement. You can also deal with the problem by restructuring your business to minimize that damage that may result from the negative credit information.

If you have a good tax planning strategy, your business is less likely to fall into the tax liability category. You should engage the services of tax accountants to help you avoid tax liabilities, or to help you resolve the problem if you are already facing it. If you are looking for advice on how to deal with unpaid tax liabilities, you can learn more on this website.

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