SMEs with tax debt need to take action

ATO tax debt refinancingOn 22 October 2019, the Government passed law which allows the Australian Taxation Office (ATO) to disclose tax debt information of businesses to registered credit reporting bureaus (CRBs). The law received royal assent on 28 October 2019.

Under the law, the ATO can only disclose tax debt information of a business where certain criteria are met.

The ATO will only disclose tax debt information of a business to a CRB if the business meets all of the following criteria:

  • it has an Australian business number (ABN), and is not an excluded entity
  • it has one or more tax debts, of which at least $100,000 is overdue by more than 90 days
  • it is not effectively engaging with the ATO to manage its tax debt, and
  • the Inspector-General of Taxation is not considering an ongoing complaint about the proposed reporting of the entity’s tax debt information.

The ATO will notify a business in writing if they meet the reporting criteria and give them 28 days to engage with the ATO and take action to avoid having its tax debt information reported.

Many businesses have previously used the ATO like a bank and racked up debts by not paying their commitments on time. This decision could now have adverse effects on credit ratings and credit insurance limits, making it harder to maintain or extend credit terms with suppliers.

There has never been a better time to get your ATO debt in order and set your business up for success in 2020. Private Mortgages Australia is able to help businesses refinance ATO debt and pay out the tax debt with a short-term mortgage. This enables the borrower to pay off the ATO debt and build up a few months of good payment history. The borrower can then try to refinance to a long-term debt and pay off the loan.

For more information about how Private Mortgages Australia can help, read our case study or get in touch via our Contact page.

 

 

Refinancing ATO Debt

Private Mortgages Australia can help refinance ATO debtThe end of the financial year can be a stressful time for lots of people as they try to manage their expenses and get their finances in order before the tax man pays a visit. If a borrower has an outstanding ATO bill and the ATO doesn’t grant an extension then they can be in a bit of strife. While having an ATO debt is not ideal, this doesn’t disqualify them from borrowing money. A traditional bank won’t lend to a borrower with an outstanding ATO debt, however, there are several steps that can be taken to consolidate tax debt in order to get the finance needed.

One way of doing this is to pay out the tax debt with a short-term mortgage. This enables the borrower to pay off the ATO debt and build up a few months of good payment history. The borrower can then try to refinance to a long-term debt and pay off the loan.

One of the major benefits of this option is that the loan comes with pre-paid payments so the business borrower doesn’t need to make payments during the term of the loan and can reinvest profits back into the business to ramp things up or focus additional cash-flow on building that good payment history with their current lender.

Having an ATO debt can be a tricky situation however, with some strategic management of the debt it is possible to get back on track and make it possible to access finance.

 

By Tony Barbone

Managing Director, Private Mortgages Australia