Article by Mathieu Marcelin, Senior Accountant, Pearce & Heers’ Brisbane Office
Legislation has now been passed, by way of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Bill 2019, which will allow the ATO to provide information to credit reporting agencies regarding certain business tax debts and allow credit reporting agencies to publish that information.
The question now is, when will the ATO start using these powers?
What is the purpose of the legislation?
The purpose of allowing the ATO to report a taxpayer’s tax debt information to credit reporting agencies is so that:
- Organisations and individuals in the business community can become aware of overdue tax debts and that they can make informed decisions based on this information;
- An assessment of the credit-worthiness of a taxpayer can be made by businesses and credit providers;
- Certain competitive benefits which are obtained by organisations that do not or avoid paying their taxation liabilities are diminished; and
- It will encourage entities with tax debts to engage with the ATO to enter into a payment arrangement.
When will the ATO refer debts to credit reporting agencies?
There are a number of requirements that will have to be met before a taxpayer’s tax debt can be reported:
- The taxpayer must have an Australian Business Number;
- The taxpayer must have at least one tax debt totalling at least $100,000 that has been due and payable by more than 3 months;
- The ATO must ensure that the taxpayer meets the debt threshold test which excludes tax debts that the taxpayer has engaged with the Australian Taxation Office to manage; and
- The ATO must ensure that there are no active complaints between the taxpayer and the ATO in respect of the tax debts that are the subject of the proposed reporting.
The reporting criteria function in a way that identifies the entities whose tax debt information is eligible for reporting. It ensures that entities, which will have their tax debt information reported, are entities that have a significant tax liability that has been due for some time and in circumstances where the taxpayer has not engaged with the ATO.
If a taxpayer meets all the above-mentioned criteria and the ATO takes the decision to report, it will inform of the taxpayer of its intention in writing at least 21 days before reporting its tax debt. This provides the organisation with 21 days to take action to prevent its tax debt information from being reported. Prevention is through either paying the tax debt or negotiating a payment arrangement with the ATO.
What is the process for stopping the ATO referring a tax debt?
To avoid its tax debt being reported, a taxpayer can take the following actions within 21 days after a notice has been issued advising that the ATO intends to refer the tax debt to credit reporting agencies:
- Pay its tax debt;
- Enter into a payment arrangement;
- Dispute the tax liability;
- Lodge a complaint with the Inspector General of Taxation about the tax debt;
- Ask for a review of the taxpayer’s reporting requirements; or
- Contact the ATO to show that it is experiencing extraordinary situations.
Assistance for taxpayers with tax debts
If you have a tax debt and wish to obtain advice or assistance regarding the options available to you, please contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.