Business owners and advisers must move now on SME tax debt disclosure as the ATO starts to turn its focus on it, according to a non-bank lender.
In 2019, a law was brought into effect which allows the ATO to report a business to credit rating agencies if the business owes more than $100,000 in tax, has an ABN, is more than 90 days in arrears and doesn’t have a payment plan in place or being negotiated.
However, restrictions put on businesses due to the ongoing pandemic put a hold on ATO’s powers. Now, ScotPac senior executive Craig Michie has said that many of its accounting partners have indicated the ATO is now sending SMEs notification to commence reporting again.
Mr Michie has called on businesses and advisers to start putting sustainable business funding in place and talk to their creditors regularly.
“The worst thing a business can do is stop communicating with creditors as it makes creditors more anxious,” Mr Michie said.
“Even if you can’t pay now but have a pipeline of work that will provide cash flow, share those details with creditors and link your payment to that future cash flow.
“SMEs should do this all the time, but it is especially important in the current business environment.”
Mr Michie said that in the past, businesses have “used the ATO like a ‘line of credit’” by not paying their commitments on time. However, there is now a strong incentive by the government agency for businesses to not run up debts.
“Now, if business owners take this road, it is much more likely to have an adverse impact on their credit ratings and credit insurance limits, and this would make it more difficult to maintain or extend credit terms with suppliers,” he said.
“The ATO is no longer prepared to be viewed as a line of credit.”
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