Are your tax debts being managed effectively?

The Australian Taxation Office (ATO) has been given authority by the Government to disclose to credit reporting agencies the details of tax debts of businesses that have not engaged with the ATO to get their tax debts under control. This measure was introduced from 1 July 2017.

It applies to the following businesses:

• Those with a tax debt greater than $10,000, and
• Those whose tax debts are 3 months or more overdue.

The Problem

If your tax debt is not being managed effectively, i.e. a payment arrangement setup with the ATO, your tax debt will be disclosed by the ATO and your credit rating affected for the next 5 years, if you meet the above criteria.

An adverse credit rating will make it difficult to obtain further finance, new credit cards, or negotiate credit terms with suppliers.

The Solution

Setup an effective payment arrangement with the ATO! Once a payment arrangement has been established it is vital to continue to meet the conditions of this which include:

• Making scheduled payments by due dates,
• Lodging future tax obligations on time,
• Paying future tax obligations on time, and in full.

A way to help ensure scheduled payments and future tax obligation payments are met on time is to maintain a separate business bank account to the trading account and transfer amounts to this account weekly to cover upcoming tax payments including GST, PAYG Instalments, PAYG Withholding, and Income Tax.

You may not yet have a tax debt over $10,000 but can foresee an upcoming ATO debt based on a recent Profit and Loss report obtained from your accounting software. Cashflow may be tight as you may have needed the business profits for new equipment, unforeseen costs or private purposes. In this instance it is important to plan ahead and setup the payment arrangement as soon as the debt becomes legally owing.

How can Lawrence help?

The Lawrence team can assist by communicating directly with the ATO on your behalf to negotiate an effective payment arrangement, taking the stress off you whilst allowing you to focus on running your business.

A longer term solution we can look at is analysing what is causing the non-payment of large tax debts in the first instance. In that regard we can assist with a Cashflow analysis that may prove useful to explain where your profits are going, how long debtors take to pay and how long you are taking to pay creditors.

Pick up the phone and give us a call today to discuss your options and avoid having your debts disclosed to credit reporting agencies.

– Phillip Hall, Accountant & Manager

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Are you managing your tax debts effectively?

At Lawrence, our diverse team of specialists will be able to help liaise with ATO direct and can investigate what is causing the non-payment of large tax debts.

Contact us today for an obligation-free chat about how this may suit your business.

This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.