if you run a business, have more than $10K outstanding tax debt which is overdue for at least 90 days, and you do not have a payment plan in place to manage it. Then you should read the following information very very carefully.
From 1 July 2017, the Australian Taxation Office (ATO) can disclose to Credit Reporting Bureaus the tax debt information of businesses that have not actively engaged with the ATO to manage those debts. This will be a new and unprecedented power for the ATO.
With the implementation of this new legislation, your key business stakeholders are acknowledged that there is an outstanding tax debt by checking the credit report. As a consequence, the businesses which fail to manage their tax debt on time would be highly likely to have trouble in applying for a trading account, or get finance for working capital, or even secure a big contract.
So what should you do to avoid this to happen:
1. If you have a current payment plan with ATO, do follow the payments schedule and make sure your future tax obligations are lodged and paid on time. Talk to your accountant if you are not able to fund the current payment plan. Be aware that a defaulted payment plan does not save your business from being reported to Credit Reporting Bureaus. And not to mention it will add difficulties for your future negotiations with ATO.
2. You applied for the payment plan but do not succeed. You should talk to your accountant, ask for a review of your tax debt components, check if there is any chance for you to apply for remission as part of your payment plan proposal to reduce the total tax. Or maybe reduce the tax debt under other remission regimes. And you should also review your business model to see how much payment you can afford. From ATO's perspective, making a promise that you cannot keep is even worse than giving no commitment.
3. Nevertheless, you should keep your book up to date. This is the precondition for speaking with ATO about your payment proposal. And this also helps the director to reduce their personal exposure to unpaid PAYG withholding debt. If you find hard to organize the record keeping, check out XERO. This next generation software made the bookkeeping easier than ever.
With the 1 July 2017 fast approaching, there is not much time left for the business to get their tax right. So if you are having trouble to catch up the tax debt payment, please talk to your accountant to get your tax in order before ATO take the move.
Alternatively, contact Tax Ezi and see how we can help you to stay away from the tax troubles.