ATO Debt & your Credit File
This year the ATO announced that they were looking to disclose your business debt to credit agencies. Effectively this could have a negative impact on your ability to attract new business and alleviate yourself from any cash flow issues. The business debt would need to have the following three characteristics before being sold on to a credit agency;
You have an ABN,
The debt is more than $10,000 and overdue by more than 90 days,
The business in question is not effectively engaging with the ATO.
The ATO are declaring that this measure has been created to “provide transparency of overdue tax debts of business, supporting other businesses in making informed decisions in credit worthiness.” Whilst this is true, it also means that the ATO can sell your debt, helping to alleviate their debtors and increasing their cash flow. Your information is increasingly becoming one of the fastest growing commodities.
Although this will soon be legislation, the third debt characteristic needed for debt reporting; “effectively not engaging with the ATO” has been out to public consultation, (as it could be open to interpretation). Watch this space for an update on this ATO definition.
Note that this is only draft legislation and not law as yet.
Legislation and supporting material
Read more on the public consultation here Draft Legislation.
How can you stop your business debt from being sold?
As well as “effectively communicating with the ATO” there is another way to prevent your business debt information from being sold by the ATO. You could try talking to a financial broker to arrange a business loan or overdraft. We recommend talking to your tax accountant or a registered financial advisor or broker such as, Bear Loans. Understanding your financial situation or future is the key to winning, in such a challenging situation.
*This information is not to be relied upon without speaking to your finance broker, tax agent or financial adviser.