A review carried out by the ATO shows that undisputed tax debts have increased by 77.6 percent in the four years to 30 June 2020. Inspector-General of Taxation and Tax Ombudsman, Karren Payne’s review found that collectable debt has grown from $19.2 billion at 30 June 2016 to $34.1 billion at 30 June 2020.

The review only covered the period up to just after the start of the Covid-19 pandemic and it is therefore likely that total debt has increased in the last 12 months.

Debt owed by small business

The review found that small business accounted for over 60% of all outstanding tax debts from 2016 onwards. With the total amount owed by small business at 30 June 2020 being $21.4 billion.

Further, just over six percent of small business taxpayers owe around 57 percent of all small business debt. So there are a large number of businesses out there with significant debt levels. It is likely that a majority of these small businesses are in financial difficulty or insolvent.

What are the tax debt risks to small business?

There are various risks associated with small business tax debt. These include:

• The ATO issuing garnishee notices to collect amounts directly from a businesses’ bank account or other sources; or
• The ATO placing companies in liquidation or personal taxpayers into bankruptcy; or
• The ATO issuing director penalty notices to make directors personally liable for company tax debts. For directors of small businesses with tax debts, this is a significant risk and can lead to further problems.

What can you do?

If you think you can pay your tax debt you should enter into a payment arrangement with the ATO. If your debt is less than $100,000 you may be able to do this online. If your debt is more than this, or you need help, you should contact us and we will be able to assist you with payment arrangements or other strategies.

For businesses which can’t pay their debts, you should consider other options such as liquidation, voluntary administration, or small business restructuring.

We can help

If your business is having difficulty paying its tax debts, then you should urgently get professional advice about what you should and can do. And TAX DEBT SOLVED can help. So, please contact us for a free, no-obligation consultation, here.