Support with strings attached

Today’s strong jobs data and a 2% jump in the sharemarket should have everyone in a good mood. The economy is getting back on track and maybe, just maybe, the volatility we’ve seen on global markets might start to calm down.

There was even some good news from the friendly folks down at the Australian Taxation Office, who announced their small business assistance package – which gives SMEs an interest holiday on tax debts and the opportunity to defer some other payments – will be extended for another 12 months, to 30 June 2011.

On second thoughts, I’m not sure that is good news. After pouring over the ATO’s new compliance guide for 2010-11, there are a hell of a lot of references to companies still struggling in a post-GFC hangover.

The Tax Office is usually very well placed to say what’s going on at the coal-face of the economy, and if it thinks companies need more assistance, that’s probably a good sign that there are still lots of SMEs still doing it tough.

Still, credit where credit is due. While the ATO is not seen as the greatest friend and entrepreneur can have, their performance during the GFC has been exemplary. The Tax Office doesn’t want companies to go out of business and it appears to have worked hard to help where it can.

If the ATO’s stance has been prompted by the Government, then the Government deserves some kudos as well.

However, a word of warning on taking up the ATO on its generosity. As early as August 2009 we were warning that there were some serious consequences attached to taking ATO help and delaying the payment of tax debts.

The main problem is that banks and other lenders look very dimly on companies with outstanding tax debts, and they won’t look to kindly on companies that had to go the ATO cap in hand.

As Patrick Stafford explains today, banks are demanding large amounts of information from SMEs who want finance. They want to know you have a good budgets, strong plans and a solid track record.

Having been on a payment plan from the ATO doesn’t exactly scream “lend to me”.

So be careful about accessing this assistance unless you really have to – you may end up paying for it long after the tax debt is paid off.