Too many business owners run their businesses paying their bills but not paying their ATO debts on time. There are important changes to the way the ATO will be dealing with outstanding tax debts from 1 July 2017.
If you owe more than $ 10,000 to the ATO and the debt is more than 90 days outstanding, you need to make contact with the ATO and make a payment arrangement otherwise the ATO will report the outstanding debt to credit reporting agencies.
The impact of the ATO advising the credit reporting agencies of the outstanding debt is that the entity will have a bad credit rating. Most banks are loath to lend when there are any records on the credit report. Having the ATO listed on the credit report will be an immediate red flag to the bank as one of their first steps in a finance application is to check the credit report.
To get a finance approval, in my experience in recent years, the banks ask for Tax Portal Reports from your accountant. These reports show the amount of your tax liabilities, when you’ve paid them and whether there is an outstanding balance.
The big difference with the reporting of the debt to the credit reporting agencies is that it stays on the credit report for five years, whereas once you have got your accounts up to date with the ATO you can get a Tax Portal Report showing a nil balance.
In order to work out a payment arrangement it is imperative to have up to date accounting records and a good understanding of your future cash flow and ability to make the payments to the ATO. This is an area that I work closely with in my current role as a virtual CFO and is dealt with in my Business Cash Flow Mastery Program.
If you have a debt to the ATO of more than $ 10,000 or you know someone in this situation, please please please, get them to make contact with the ATO to get an arrangement in place, or click on the link here to provide some basic information and book a time for a complimentary chat with me.