Business Tax Debts and Credit Reporting

A reminder that recent law changes allow the ATO to share tax debt information with credit reporting agencies.

However Government policies recently announced limit it to :

• Businesses eg those with a ABN only. However sole traders may be impacted as their is an immediate correlation between the sole trader activity and the taxpayer unlike for example,a company BAS debt. Personal tax debts are not impacted unless the person is a sole trader of partner in a partnership.
• Tax Debts exceed $100,000 for MORE THAN 90 days excepting
  • Debts where the entity has a instalment agreement with the ATO
  • Debts subject to hardship applications
  • Debts subject to a dispute / objection / AAT/ Court process that has not been finalised
  • Debts subject to a investigation by the inspector general of tax

Strategies to avoid this issue

1. Structuring so that the business and those of its ownership are distinct so that credit reporting for a primary borrower is not impacted
2. Paying ATO debts as they fall due or within 90 days
3. Paying debts so that MORE than $100K is not overdue by 90 days
4. Entering into and MAINTAINING an instalment agreement

 

If seeking business finance, most lenders will ask for a copy of the business ATO portal so will uncover any unpaid tax debt. However, some lenders are ok with tax debt provided they understand the cause and repayment strategy.