The Australian Taxation Office (ATO) has recently issued a stern warning to businesses with substantial tax debts. The ATO has stated that it will disclose these debts to credit reporting agencies once they go over a certain threshold and remain unaddressed for too long. 

You don’t want a bad credit rating on your business any more than you want a bad personal credit rating. If you’re in danger of being one of the companies that the ATO reports, you need to get on top of the debt immediately.

You’ll be in the ATO’s crosshairs if your tax debts exceed $100,000, and they’re overdue by more than 90 days. 



What does this mean for your business?

Just like a personal credit rating, credit providers will check a business’s credit score when that business applies for credit. 

If the credit rating comes back as poor, then the financial provider will question whether the business can service its debt. That will mean that credit will become more expensive (with a higher interest rate and fees, so the finance provider can protect themselves from risk), or the business will be flatly denied the credit. 

This can be catastrophic for a business. Without access to credit, it can be difficult to invest into growing the business, or even maintaining cashflow and operations with suppliers. Businesses with bad credit ratings generally struggle to survive long enough to restore their credit to good standing. 

This is particularly true, given that that there is still the debt to the ATO to deal with… and now using credit to manage that debt is no longer possible.



What should you do if you’re at risk?

The first priority should be to avoid the situation where your business owes the ATO large amounts of unpaid tax. 

If you are accruing ATO debt, contact the EPAS team early on, when the debt is smaller. Not only will we help you discharge that debt – often for cents on the dollar – but we’ll conduct a full audit of your business and help you address the weaknesses that allowed the debt to occur in the first place. 

That’s the optimal solution. If you have wound up in a more desperate situation, however, we can still help. 

As Australia’s only specialist Emergency & Preventative Accountants, we specialise in helping clients deal directly with the ATO, by providing support in negotiations and presenting a case to the ATO for lowering the tax debt. Though the ATO can seem hostile, its overarching goal is to help businesses stay in operation and compliant, and with the right, good-faith negotiation support from EPAS, in most cases it’s possible to work out a solution that will keep your business solvent and, ultimately, debt-free. 

Once you’ve dealt with that initial debt, it’s important to structure the business in such a way that it won’t happen again. To assist with that, we will perform a deep dive analysis of your business's financial position and build long-term solutions that will bring your business into a financially stable position. Many other accountants miss opportunities there, with services that are less than strategic. When you’re facing tax debt, you need a partner that understands how businesses get into trouble, and what can help them dig their way out.

While the ATO’s move to disclose business tax debts to credit reporting agencies may seem daunting, and it is likely to affect thousands of businesses across Australia over the next year, it’s important to remember that there are resources and services available to help. With the right tools and strategies, your business can face down tax debt, and return stronger than ever. 

Whatever you do, though, don’t ignore the problem. Tax debt doesn’t disappear. It’s something you need to address. If you are facing ATO debt, then the best time to contact EPAS is yesterday. The second-best time is right now.