Tax debts may be released by ATO to credit agencies

Tax debts may be released by ATO to credit agencies. Tax debts could soon affect the credit scores of businesses, with the government’s introduction of draft legislation to allow ATO to share debt details of businesses to credit rating agencies.

The proposal only applies to businesses that meet certain conditions and there are also safeguards to protect businesses that make an effort to resolve their debt. Your tax debts could soon affect your credit score after the government released draft legislation to allow ATO to share debt details of businesses to credit rating agencies subject to certain conditions. Previously, it was an offence punishable by 2 years imprisonment for a taxation officer to disclose protected information, such as information relating to a particular taxpayer’s tax debt. There was no exception in the legislation which allowed the disclosure of debt information to credit reporting agencies, and as such tax debts were not factored into credit ratings of businesses.

According to the government there was some evidence that this discrepancy allowed businesses to prioritise other debts ahead of tax debts leading to a depletion of government coffers. Its hoped that having tax debts on equal footing with other debts will act as an incentive for businesses to make timely payments or at least engage with the ATO to work out a debt payment solution, to avoid having their credit worthiness or ability to obtain finance affected.

The minister for Revenue and Financial Services, the Hon Kelly O’Dwyer said:

“Improving transparency by making overdue tax debts more visible will provide businesses and credit providers with a more complete assessment of the creditworthiness of a business”, which will also “reduce the unfair advantage obtained by businesses that do not pay overdue tax debts, and encourage businesses to engage with the ATO to manage their tax debt”. 

The proposal applies only to businesses that meet the following requirements:

• registered on the ABR;
• has a tax debt and at least $10,000 of the debt is overdue for more than 90 days;
• is not a DGR, not-for-profit entity, government entity, or complying superannuation entity;
• is not effectively engaging to manage their tax debt; and
• the Commissioner has taken reasonable steps to confirm that the Inspector-General of Taxation does not have an active complaint from the entity.

Businesses are not considered to be effectively engaging to manage their tax debt unless the following conditions are met:

• has entered into an arrangement with the Commissioner to pay their debt by instalments;
• has objected against a taxation decision to which the tax debt relates; or
• applied to the AAT for review or appealed to the Federal Court against a decision made by the Commissioner to which the tax debt relates.

As an additional protective measure, any disclosures to credit rating agencies will also only be permitted if the Commissioner has notified the taxpayer at least 21 days before the disclosure. The notice will set out the steps for the business to take to be excluded from disclosure including ways to manage their debt. However, the conditions of notifying the taxpayer at least 21 days before the disclosure and consulting with the Inspector-General of Taxation do not apply for disclosures to update, correct or confirm information previously disclosed. Even though this proposal will not apply until it receives Royal Assent, it may be wise to get on top of any tax debts now.

Tax debts may be released by ATO to credit agencies, do you have an outstanding tax debt?

If you have a tax debt, even though this proposal may not apply to you yet, you may still be subject to ATO debt recovery action. If you have trouble paying your tax debt we can help you work out a range of options and contact the ATO on your behalf to arrange a payment plan.

Hunter Partners are Accountants, Tax Agents and Financial Planners. We can assist you with all aspect of your accounting, tax and financial planning requirements, call Hunter Partners on (07) 4723-1223.