Managing your business cash flow is very important for all sorts of reasons. A recent Government announcement has reinforced the need to keep strict control of business cash flow and planning. Although not yet passed into law but expected to be later this year, it will allow the ATO to disclose business tax debt information to registered credit reporting bureaus (CRBs).
Credit reporting bureaus
Banks and other lenders provide consumer credit information to central databases managed by CRBs; Dun and Bradstreet (D&B) and Veda Advantage are prominent Australian CRBs.
CRBs then include that information on the individual’s/business’ credit report. In turn, credit providers can then obtain a copy of credit reports from CRBs to assist them with lending and credit decision making.
How it will work
The ATO says that the changes are intended to support more informed business decision making and to reduce an unfair advantage gained by those who do not pay their tax on time. It is also intended to encourage businesses to engage with the ATO to manage their tax debts.
The ATO will be able to disclose tax debt information to CRBs if the business meets the following criteria:
Has a tax debt of at least $10,000 that is overdue by more than 90 days
Has not effectively engaged with the ATO to manage the debt and
Has an ABN and is not an excluded entity.
The ATO will provide 21 days notice to respond before information is reported to CRBs.
Businesses that are effectively engaging with the ATO to manage their debts will not be reported to CRBs. “Effectively engaging” is expected to include businesses that have established an ATO payment plan or are in the process of disputing the tax debt.
These changes will give businesses more reason to engage with the ATO if they have a tax debt. However, we encourage you to fully plan for tax obligations. If you would like help to plan for such circumstances, please contact us.