ATO issues warning notices to businesses with $100,000 in tax debts under new debt disclosure powers

The Tax Office has started issuing warning notices to small businesses with tax debts of more than $100,000, under new powers that allow it to disclose unpaid taxes to credit reporting agencies.

The Australian Taxation Office (ATO) confirmed it began issuing the letters to businesses in August, warning them that it will disclose their tax debts to credit reporting bureaus if they don’t cooperate in managing their debts.

It’s the first time the ATO has followed the new compliance process since the federal government introduced the disclosure of business tax debt measure in 2019, Accountants Daily reports.

An ATO spokesperson confirmed they started issuing the so-called intent to disclose notices early this month, which give businesses 28 days written notice of the ATO’s intention to disclose the business’ tax debts to a credit reporting bureau. The letters also explain what a taxpayer can do to avoid their debts being disclosed.

“This measure is about engaging those businesses that have continued to ignore our attempts to work with them to manage their tax debts,” the spokesperson tells SmartCompany.

The spokesperson did not disclose how many Australian businesses have more than $100,000 in tax debts, saying the number can fluctuate and the level of debts is not the only criteria used to determine if the debts should be disclosed.

The new measure was introduced in late 2019 as part of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019.

The amendment gave the ATO the power to disclose a businesses tax debts of $100,000 or more to a credit bureau, which is a body that collects and shares data with credit providers about a borrower’s financial history, such as Experian, Equifax or illion.

The tax debts can include outstanding income tax, activity statements, fringe benefits tax, superannuation guarantee debts, penalties and interest.

Neil Billyard, national head of tax at BDO Australia, says it’s surprising to see the ATO begin exercising its power to disclose business tax debts considering coronavirus trading restrictions continue to affect businesses.

“It’s surprising that the Tax Office is doing it right now, and you would be really disappointed if they were to take a hard line with taxpayers at the current point in time,” Billyard tells SmartCompany.

Despite the ATO’s move to begin using its expanded powers, Billyard says the ATO has been “quite lenient” over the last 18 months, allowing taxpayers to defer payments without imposing penalties or interest.

Billyard encourages any business owner who receives a notice not to ignore it so that the ATO doesn’t follow through with its plans to disclose information to a credit reporting agency.

“It’s important that they talk to the Tax Office either directly or through their advisors,” he says.