Why the ATO wants to help your business – yes, really

The viability of a business is of course of keen concern to the business owner. The owner’s livelihood depends on it.

But the Tax Office also takes an interest in business viability because that has an impact on the ability of the business to pay its tax and superannuation debts. That’s not rocket science, but in taking that interest, the ATO also offers help to SMEs who may be having trouble meeting tax and superannuation debts.

The ATO says it provides support and assistance to viable small businesses and individuals who are experiencing short-term financial difficulties and who are willing to work with the ATO to address their tax and superannuation debts.

Happy business, happy taxman

According to the ATO, its decisions and actions around debt are now much more aligned with the taxpayer’s lodgment and payment history and their capacity to pay. The ATO also has a stronger focus on business viability and its impact on a business’ ability to meet its liabilities going forward. Seems like a happy and healthy business means a happy ATO.

Without being too cynical, the ATO’s interest in the financial health of a business is not unreasonable and should generally be welcomed. If it is prepared to offer help and assistance to a business in financial difficulty, that’s no bad thing.

To ensure a fair and consistent approach to assessing business viability, the ATO has developed an assessment tool to maximise an evidence-based approach to making decisions about small business tax debt.

Using the results provided by the ATO’s business viability assessment tool (which can be accessed on the ATO website), together with other information about taxpayers’ individual circumstances, the ATO considers it is better able to distinguish between viable businesses experiencing short-term financial difficulties and businesses with longer term difficulties that may not be viable.

Based on the information a business enters, the assessment tool provides the business with a summary financial report (including gross margin details, net assets, debtor and creditor analysis, and working capital position) and a summary of key business performance indicators.

Where the ATO considers there are clear indications that a business is not viable and does not have the capacity to repay its debts and meet ongoing commitments, the ATO will advise the taxpayer of this and suggest they seek professional advice as to their options.

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