ATO Debts may affect your Credit Rating
The Australian Taxation Office (ATO) are about to change the way they treat your outstanding business debts and it should be ringing alarm bells for all Small Businesses. The new approach by the ATO is a game changer.
While not quite active legislation, the ATO have advised they will start reporting outstanding debts (meeting a certain criteria) to Credit Agencies. Effectively, your failure to pay ATO debts on time will go on your Credit Rating and affect your ability to get finance.
In the past, a financial institution might pick up outstanding ATO debts on a formal loan application process, but on almost every other form of finance application it could slip through.
The implications are far wider then you might first think. By reporting it to Credit Agencies, it may affect your ability to get finance whenever a Credit Agency is consulted as part of the standard loan process. Small business should be thinking about finance applications such as:
- Supplier Credit/Accounts
- Annual reviews by banks
- Refinance to new financial institutions
- Overdraft applications
- Chattel Mortgages, Leases and Hire Purchases
- Credit card applications
Plus others I’m sure.
More information can be found on the ATO website here:
If you are a business that has been putting the ATO last on your list of priorities…. time to re-think your strategy. Proper budgeting and cashflow management is required to ensure the ATO is kept happy if finance is an important part of your business (or is likely to be).
On the other hand, if you are a business that has missed out on collecting debts from one of your customers because the ATO has sent them bankrupt, then maybe you should be adding a Credit Agency check to your standard customer account process.