In August, the ATO began issuing warning letters to businesses with tax debts of more than $100,000, with a warning that if efforts were not made to manage the debt, the ATO intended to disclose their tax debt information to credit rating agencies.

Certain restrictions related to the ongoing pandemic, momentarily hindered the ATO’s impetus on this front but efforts have ramped up again recently and warning notices are being issued to businesses with tax debts over 90 days or overdue.

Considering this development may adversely affect some clients’ credit rating, and their respective ability to attain mortgages or finance for larger projects, read on to understand the impetus behind the change and how you can mitigate damage to your company credit rating.


What is the Legislation?

The measure was introduced late 2019, as part of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. It allowed the ATO to report an ABN registered business to credit rating agencies, a body that collects and shares data with credit providers about a borrower’s financial history. These reports were for debts of more than $100,000 in tax, more than 90 days in arrears, and without negotiation or a payment plan in place.

The reportable tax debt can include outstanding income tax, activity statements, fringe benefits tax, superannuation guarantee debts, penalties, and interest.

The timing of the bill meant that pandemic restrictions halted action being taken by the ATO until recently, heightening the need for businesses and finance advisers to begin putting sustainable business funding in place and talk to their creditors regularly, if they aren’t already.


Challenging Times Continue for Businesses

Throughout the pandemic the ATO has been supporting businesses and getting them back on their feet has been one of its key aims. As a result, Australian businesses now owe more than ever, and this support eventually had to end.

This makes it a challenging time for businesses with the pandemic still festering. For those that have received a warning letter from the ATO, stating “Act now or your tax debt will be reported to credit reporting bureaus”, there is a channel where an ATO credit reporting dispute can be lodged directly.


Advice for SMEs

Despite the ATO beginning to exercise these expanded powers, they have been “quite lenient” over the last 18 months, allowing taxpayers to defer payments without imposing penalties or interest.

For any client or business owner who receives a notice, opening dialogue with the ATO through negotiation or dispute is essential. This ensures that the ATO doesn’t follow through with its plan otherwise, to disclose the information to a credit rating agency. This can be done directly with the Tax Office or through your finance advisor.

Where the ATO in the past has been lenient on debt, there is now a strong incentive by the government agency for businesses to not run up debts.


Southshore Finance work closely with our clients to ensure you are receiving the right business finance information for your circumstances. It’s all about understanding your needs and providing educated solutions to assist you in your success.