The impact of Tax Debts on Credit Scores

Clearing your tax debt could be more urgent than we would have thought otherwise-

Credit rating agencies are said to start receiving your organisation’s tax debt details from the ATO. This legislation aims to create a seamless link between the ATO and credit rating agencies to ensure that certain types of businesses are keeping their tax debts in track.

This reform only applies to certain businesses that:

  • Are not actively and effectively involved with actually resolving their tax debt
  • Are not falling under the model of a not-for-profit company, an entity owned by the government or a complying superannuation entity
  • Has been registered on ABR
  • Essentially has a tax debt, where a minimum of $10K has been overdue for more than 90 days
  • With whom it has been confirmed that commissioner had taken necessary action to confirm that the Inspector-General of taxation has not received an active complaint regarding the business in question

Under the previous regulation, it was punishable for a tax officer to share any information about the business’s tax debt. A 2-year imprisonment held back taxation officers from sharing any such confidential information. Therefore, tax debts were directed to credit rating agencies. The recent reforms urge business owners to be alert about their tax debt as it can severely affect further proceedings and this is where being affiliated with an expert taxation accountant could potentially save your business from legal issues. The government’s crackdown is a result of their research and surveys that found that business owners did not prioritise tax debts when compared to their other debts.

The ATO categorises your business as not effectively engaging to manage the tax debt unless the following applies:

  • Business has placed an objection against a decision made by the ATO relating to tax debt
  • Business has initiated an arrangement with the Commissioner to pay their debts by instalments
  • Business has submitted a request for a review to the AAT or has involved the Federal Court against a decision made by the Commissioner to which the tax debt relates

There are a few more nuances of this new reform that we think you should find out about. If you have any questions, our friendly experts would be happy to help. We are also in a position to liaise with the ATO to work out payment plans for your business.

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