The Australian Tax office (ATO) has begun dispatching letters indicating plans to disclose tax debt information to various credit reporting agencies for businesses that owe over $100,000 in tax debts. The businesses have been given up to 28 days to enter into agreements on how they will make payment on said debts that include income tax debts, fringe benefits tax debts, activity statement debts, interest, and penalty charges. SMEs are said to have an ATO debt amounting to $21.4 billion for the 2020 financial year.
The authority to make such disclosures comes from Treasury Law Amendments that were passed in 2019. Under the bill, businesses that have one or more tax debts amounting to $100,000 or more that have been overdue for in excess of 90 days may have this information released. The disclosures are especially a possibility where businesses have not effectively engaged with the ATO on their tax debts.
The authority had paused pursuing tax debts during the pandemic but looks ready to resume their compliance activity now. This is despite some opposition from industry pundits that such a move would add pressure to businesses still struggling because of lockdowns and other pandemic restrictions.
Senior manager of tax policy at CPA Australia, Elinor Kasapidis, has warned that businesses are still facing challenging times and needed support. She recommended that the ATO hold off on disclosures for a while longer. If they however insisted on pursuing this course of action, she advised being flexible in handling businesses that were under financial strain.
The national tax head of BDO Australia, Neil Billyard, also voiced surprise that the ATO was exercising its powers at a time when trading restrictions were still negatively affecting businesses. He however noted that the ATO had been generous over the last 18 months by allowing businesses to defer payments without imposing interest or penalties.
A spokesperson for the ATO said that the decision to send out letters was in response to some businesses that have been ignoring attempts to engage with the authority on managing their tax debts. Billyard is encouraging businesses not to ignore the notices, but rather enter into discussions with the ATO either directly or through their advisers. The letters also include guidance on what measures the taxpayer can take to avoid having their debts disclosed.
Jirsch Sutherland partner, Andrew Spring, is also advising retailers that have suffered inconsistent cash flows to seek help now rather than later. He said the ATO was looking to ramp up its enforcement activity, making it important to enter into dialogue early.
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