New legislation will now enable the ATO to disclose tax debt information to credit ratings agencies, which has the potential to affect the ability of individuals and business to obtain finance or even re-finance existing loans.

The government’s aim with this new law is to reduce the unfair advantage leveraged by certain business that do not pay their tax before the usual deadlines.

Details that can be disclosed by the ATO include activity statement debts (eg GST, PAYG withholding), superannuation debts, FBT debts and penalties and interest charges.

At this stage, there is specific criteria that a business needs to fall into in order to be subject to this new law, which is:

  • The business has an ABN and is not an excluded entity (ie is not a deductible gift recipient, registered charity, government entity or complying superannuation entity).
  • The business has one or more tax debts, of which at least $100,000 is overdue by more than 90 days.
  • The business is not effectively engaging with ATO to manage its tax debt.

When a business meets the above criteria, the ATO will be required to notify the business and allow it 28 days to take action before any disclosure can take place.

By making these large, overdue debts more visible, the ATO hopes it will encourage business to make better decisions about how they operate and where they place their money.

It is also important to note that this disclosure will only be provided to registered credit reporting bureaus that are registered with the ATO and have entered int can agreement detailing the terms of reporting.

Source: www.ato.gov.au/General/New-legislation/In-detail/Other-topics/Disclosure-of-business-tax-debts/; www.ato.gov.au/General/Gen/Consultation-paper–ATO-s-approach-to-disclosure-of-business-tax-debts/

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