ATO will now report tax debts to credit rating agencies as @ 1/7/17
Do you know that your tax debt can now affect your credit score, effective from 01 July 2017?
From 1 July 2017, the Government will allow the Australian Taxation Office (ATO) to disclose to Credit Reporting Bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts. The ATO does not currently provide this information.
This measure will initially only apply to businesses:
- that has an Australian Business Number (ABN),
- that has a tax debt of more than $10,000 that is at least 90 days overdue and
- it has not effectively engaged with the ATO to manage its tax debt.
. Businesses are expected to pay taxation debts in a more timely manner to avoid affecting their credit rating.
Does this affect your ability to borrow?
Morgage broker, Dinath Abeysinghe says that ibanks and other lenders do not approve a loan when you have a tax default on your credit file. These tax defaults will remains listed on your credit file for 5 years. Not only prime funding and asset finance for your business but this may affect your personal borrowings for a home loan or investment property and also applying for a credit card.
What you must know and how we can help?
Firstly and foremost, If you have a tax debt you will need to make a payment arrangement and make sure that the payments are made on time. However, our advice is to take proactive action. Our advice is for you to be smart enough to avoid jeopardising your credit rating due to a tax debt.
Consider preparing a budget and a cashflow forecast for your business - All successful businesses have a commitment to preparing a financial map for the year ahead. When preparing your annual budget, plan for your periodic tax payments to the ATO . A well-structured budget will allow you to measure your budget against actuals. Ask your accountant to set up a cash flow forecast on your accounting system so that you can monitor your forecasted cash in-flows and out-flows regularly against actuals. Please not a budget and a cashflow forecast are 2 different concepts.
Be smart and proactive. Stay on top of your tax debt. If you are having cashflow issues and need assistance please contact Uplift Accounting sooner rather than later. We're here to help you.