The tax debt of sole traders have begun to be disclosed by the ATO to credit reporting bureaus (CRBs), should they meet the criteria.
There are advantages and disadvantages to this, however it will even the playing field for all businesses.
To the credit of this move, transparency is always a good thing. Everyone, including the market, credit providers all get to see what level of debt a business has.
Also, for the sole trader, knowing that their debt might negatively impact their ability to obtain more credit might make them more proactive about engaging with the tax office.
Accounting Tax Solutions believes it is great that fairness in the tax system is being implemented in any way possible. If one business is compliant and another isn’t, yet there are no repercussions for the latter, then this gives one business an unfair advantage over another. Disclosing the tax debt of certain businesses could change that.
However, each situation is different, and one act from the ATO could completely destroy a sole trader’s livelihood.
Especially during the COVID-19 pandemic, these smaller businesses were hit hard and debt was necessary in order to keep afloat in many situations as revenue all but halted. Some individuals need a bit more time to recharge their financial health in order to get back on the right track and a swift blow by the ATO could hinder this.
Current rules dictate that a tax debt needs to be over $100,000 and be related to a business debt.
Thankfully, the ATO has said that any business that is actively engaging with them will not be referred to the CRB, even if their tax debt exceeds that $100,000 mark.
We here at Accounting Tax Solutions are aware that many businesses unfortunately treat the ATO without the respect that they ask for. When money gets tight and a business is unable to pay their expenses, the ATO is one of the first that can be left off the list.
However, by just communicating with the ATO and using our dedicated team as a means of support, you can establish effective means to pay your debt so that you can avoid your tax debt getting reported.
Should you receive notification that your tax debt might be declared to CRBs and would like to understand what this might mean or how to avoid it, do get in touch with a member at Accounting Tax Solutions.