The Australian Tax Office is as mad as hell and just won’t take it anymore from small businesses. Now the ATO has permission from the Government to publicly name and shame those who have covid-created unpaid tax debts!
The Daily Telegraph’s John Rolfe reports that unpaid debts to the ATO will be recorded on “publicly available credit reports…” and “…the crackdown also involves hundreds more businesses being hauled into the Federal Court to face winding up action”.
There are tens of thousands of small businesses set to be targeted as the overall tax debt of the sector has ballooned from $26.4 billion before the pandemic to now $52.4 billion. The covid lockdowns crippled many businesses and the Morrison Government instructed the ATO to cut them some slack, but its patience has run out, so non-payers could find themselves wound up by a Federal Court decision.
To see the ATO’s changed attitude, in 2022-23, only 867 tax debtors were reported to credit agencies. However, between 1 July and 20 December last year,163 have been reported. That’s a huge change of heart from the ATO!
Interestingly, Rolfe tells us that “the ATO only got the power to disclose business tax debts in October 2019.” And when a credit agency is notified by the ATO about a troubled business not paying its debts, the reporting of it can mean other suppliers can refuse to do business with them.
Small Business Ombudsman Bruce Billson, who’s a reasonable guy and a big supporter of small business, has a fair take on the ATO’s stance, pointing out that when one business isn’t paying tax, it’s “an unfair advantage over those who are meeting their obligations.”
And there’s another plus from the action. “The credit agency notification is a reasonable way of alerting other businesses to the fact that a large sum of tax is outstanding and if you were to offer trade credit or finance, you might not be paid either,” Mr Billson told the Telegraph.
Luke Achterstraat, CEO of the Council of Small Business Organisations Australia, thinks “bad apples” need to be weeded out, he worries that the ATO mightn’t recognise that there are many businesses still playing catch up from the challenges of covid. And to be fair, even the Chinese economy is still struggling with the consequences of the pandemic lockdowns.
All this comes as small businesses are also coping with rising wages, a lack of staff, 13 interest rate rises, sliding retail sales and the high expectation that an economic slowdown is coming. This is why Shane Oliver, chief economist at AMP, thinks we’ll see three interest rate cuts this year. You can see my interview with Shane Oliver here: https://switzer.com.au/the-experts/peter-switzer/switzer-investing-tv-12th-february-2024/