ATO starts applying pressure to collect debts – august 2021
Aug 05 2021
On 28 October 2019, legislation was given Royal Assent which provides the ATO with powers to disclose tax debts outstanding of more than $100,000 to credit reporting bureaus. These tax debts include income tax debts, activity statement debts, superannuation debts, fringe benefits tax debts, penalties and interest charge debts.
These new powers have not been exercised by the ATO since the legislation passed due to the continuing COVID-19 Pandemic and the various debt deferrals in place during 2020. However, the ATO has now commenced using these powers as it commences its compliance and recovery program in the face of the growing nationwide tax debt. The process commences with a letter from the ATO requesting that the taxpayer take action to pay their tax debt in full or enter into an acceptable payment plan.
Should there be no response or engagement with the ATO, the outstanding debt may be disclosed to credit reporting agencies, should there continue to be no engagement.
Such disclosure would no doubt have impact on the ability of businesses to source finance or supply into the future, or may impact existing finance facilities and supply agreements. Such reporting would be worse for businesses already struggling under lockdown restrictions.
Companies with such substantial tax debts should be considering their options for the future if they are unable to satisfy their outstanding tax debts in full or be able to agree to a financially manageable debt repayment plan.
Such options would include the possibility of restructure by either a Voluntary Administration or a Small Business Restructure as appropriate. These options could include a compromise of any outstanding tax debt. From our recent experience, the ATO has been supportive of these arrangements.
At a minimum, to reduce their tax debt levels, business owners with a substantial outstanding tax debt, should be engaging with their accountant to consider their payment options. Alternatively, should the overall business be in financial distress, consider and explore the insolvency restructure options available.
PCI Partners has the expertise and experience to provide you or your clients with the advice you need in financially distressed circumstances.
For a free, no-obligation discussion, please feel free to contact Stephen Michell | Philip Newman | David Quin