Although we don’t provide taxation advice, the SBDC’s free business advisory service is available to help develop next steps for you to manage business debt, or to connect you with someone who can best understand your situation.
Small business owners with a business tax debt are encouraged to work with the Australian Taxation Office (ATO) to help manage it.
Dealing with financial stress while running a business can be difficult. It is often tempting to brush it aside and deal with it at a later stage, or panic and try to resolve your debt through a short-term solution. However, there are a variety of tailored resources available to help you manage your tax debt without resorting to extreme measures.
What is the Disclosure of Business Tax Debts program?
As part of the Disclosure of Business Tax Debts program, the ATO has written to taxpayers that meet the criteria to have their tax debts disclosed to credit reporting bureaus (CRBs). The ATO has identified small businesses including sole traders with large outstanding debts as part of this process.
The aim of the Disclosure of Business Tax Debts program is to address the unfair advantage gained by businesses who are not meeting their tax payment obligations. If you receive a letter and do not engage with the ATO to manage your debt, you may receive another letter telling you that your debt has been disclosed to CRBs. To avoid this, it is important that you work with the ATO and negotiate a mutually acceptable plan to avoid your debt information being disclosed.
What you need to know
Your tax debt may be disclosed if you meet all the following criteria:
- you have an Australian business number (ABN)
- you have one or more tax debts and at least $100,000 is overdue by more than 90 days
- you are not engaging with the ATO to manage your tax debt
- you don’t have an active complaint lodged with the Inspector-General of Taxation about the ATO’s intent to report its tax debt information.
What is the tax penalty amnesty scheme?
The tax penalty amnesty scheme was introduced in the 2023-24 Federal budget, for small businesses with an annual turnover of less than $10 million. It will waive failure to lodge penalties on certain payments if businesses declare these debts to the ATO.
The amnesty applies to late payments originally due between 1 December 2019 and 28 February 2022 on:
- Income tax returns
- Fringe benefit tax returns
- Business activity statements (BAS)
In order to be indemnified against fines, which could be up to $1,100 per overdue payment, businesses must file their overdue payments with the ATO by 31 December 2023. If you will have trouble paying your overdue payments, the ATO is open to negotiating a payment plan. The amnesty will not apply to late superannuation payments.
Help is always available
If you find yourself in a situation where you are struggling to repay your debts, you are encouraged to reach out to the ATO for help and assistance. You will not be contacted as part of this program if you are actively engaging with the ATO to manage your debt.
What will the ATO do when I contact them about a tax debt?
The ATO wants to help you manage your debt effectively in a way that allows you to continue operating your business. They encourage you to contact your tax adviser and bring all your lodgements up to date so you have a full picture of your tax position. If you cannot pay in full, they will encourage you to start paying back your debt by setting up a setting up a payment plan.
Are there exceptions?
Excluding the tax penalty amnesty scheme provisions, if you find yourself in exceptional circumstances such as a family tragedy, a serious illness or you are impacted by a natural disaster, your case will be assessed on an individual basis to find the best solution for you. More information can be found on the ATO website.
The ATO’s message to small business owners is not to stick your head in the sand, and even if you are unable pay the debt immediately, contact the ATO or your registered tax professional for help setting up appropriate payment arrangements.
The ATO will only report business tax debt information to CRBs that are registered with the ATO and have signed a Deed of Agreement, agreeing to ATO standards and requirements regarding the recording, removal and use of tax debt information. Tax debt information is removed from a CRB’s credit report when the business no longer meets the criteria for disclosure, for example when they pay their debt in full or are adhering to a payment plan.