Profitable companies at risk with ATO reporting tax defaults to credit bureaus

Pre-insolvency specialist business consultants, de Jonge Read , warn that even profitable companies are at risk of new ATO debt disclosure laws, urging vigilance around tax compliance.

The ATO received powers in 2021 to disclose non-compliant businesses with tax debts greater than $100,000 to Credit Reporting Bureaus. The recent post-pandemic crackdown has seen the ATO now dramatically enforce these rules. The ATO considers a business non-compliant if they have not engaged with the ATO for more than 90 days to manage these debts.

Executive Director, Hank de Jonge, says the result can be disastrous, even for profitable companies who might well have otherwise been able to trade out of these debts.

“Previously, any problem a company had with the ATO was always secret,” said Hank. “Now all of the creditors can know about the ATO debt.

“Suppliers’ trade credit insurance is linked to doing business with companies who have solid credit scores which are made vulnerable with an ATO disclosure.

“We worked with a building supplier recently who found themselves in arrears with the ATO, and inadvertently defaulted on their payment plan. When the ATO issued one of these notices, within 24 hours three of their main suppliers said they wouldn’t supply them anymore even though all their accounts were paid and up-to-date.

“This was a large, profitable business who could have easily traded their way out of the debt but the listing of the default stopped supply and the business in its tracks,” said Hank.

These ATO powers coincide with a more severe approach taken in recent years by the ATO, seeking to reclaim significant business debt accrued over the pandemic.

“In 20 years, I’ve never seen the ATO as aggressive as they are now,” said Hank. “It’s going to get tougher, so now is an opportunity for anyone in a difficult situation to seek advice and formulate a strategy before they’re pushed to deal with it.

“The value of a pre-insolvency expert is first understanding the owners’ personal and business goals,” said Hank. “Some people just want to pull up stumps, some want to sell and others want to continue with a profitable business.

“Each approach can take a different path to structuring the business, the debt, and the options to negotiate with creditors,” said Hank. “As project managers, we can guide businesses through that highly daunting process.

“It costs them nothing to pick up the phone to us, rather than live in doubt and have unanswered questions.”

You can join Hank and the de Jonge Read team on the 10th to the 12th of October at The Bookkeeper Event, being hosted by the Australian Bookkeepers Network (ABN) in Adelaide’s prestigious Hilton Hotel. Buy tickets today.