The ATO will soon be able to report your tax liabilities to various credit reporting agencies. Obtaining credit could therefore become harder for those entities that do not pay their tax and do not engage with the ATO.

Legislation has now been passed

The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 passed through the Senate on 16 October 2019 and House of Representatives on 22 October 2019.

The legislation received royal assent on 28 October 2019, and the part of the legislation dealing with referring tax debts to credit reporting agencies commenced the day after.

Criteria to report tax debts

For the ATO to report a tax liability:

• The taxpayer requires an ABN;
• The total tax liability needs to total at least $100,000 and be 90 days or more overdue;
• The tax debts exclude any debts that are subject to a payment arrangement; and
• The taxpayer must not have an active complaint with the ATO regarding its liabilities.

Tax debts can include amounts for income tax, GST, PAYG, superannuation, fringe benefits, penalties and interest charges. 

Disclosure duties

Under the new legislation the ATO will be required to issue a Notice of Disclosure to the taxpayer informing them of the ATO’s intent to report their liabilities to a credit reporting agency. The notice will explain why the ATO has come to this decision and set out the amount of tax debts owed and to be reported.

The taxpayer will have 28 days in which they can either lodge a complaint or dispute the notice or amount of the liability or come to an arrangement to pay the liability.

Purpose of the new changes

The primary purpose of the change is to reduce insolvency risks for businesses trading with entities which have large tax debts. It allows the ATO to report the tax debt information of entities that consistently do not engage with the ATO. Entities looking to obtain credit from suppliers or finance from financiers previously could hide their tax liabilities.

The new legislation will also encourage taxpayers to engage with the ATO to manage their liabilities and avoid a disclosure on their credit file.

Advice and assistance

If you or your business are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help advise you of the options available with a free, no-obligation consultation, so contact us here.