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RELATED ALERTS

The past three years have seen an unprecedented number of natural disasters and world events which caused the Australian Tax Office to cut businesses some slack in relation to their debt obligations. After bushfires, floods, Covid-19 and floods again, the ATO simultaneously eased debt collecting and offered multiple stimulus packages during 2020 to help keep businesses afloat through staff and product shortages. However, now that there is a sense of new normality in the air, the ATO are resuming their debt collecting services and Australian businesses are being urged to take a proactive approach to organising their financials and start paying back the two years worth of debt.

In the 2020 financial year alone, debt owed to the ATO reportedly skyrocketed to a staggering $34 Billion dollars; the majority of which is owed by small to medium sized businesses. Business Activity Statements (BAS) and Pay As You Go (PAYG) taxes comprise a significant portion of what is owed to the ATO. Businesses may face heavy penalties or even risk being disclosed to credit reporting bureaus if the debt is not resolved in time.

This means that if you are a small or medium business owner and you have taxes owing to the ATO, now is the time to act.

Being proactive in your approach to managing your business’s financials is key to operating smoothly and maintaining a good credit score. It’s important to understand that it is normal if you feel overwhelmed and there is help available. 

Employing the services of a professional financial advisor is an excellent way to ensure your business is in the best possible financial position. Advisors can negotiate with the ATO directly on your behalf to secure a manageable payment plan. In addition to this, advisors can help you navigate overdue BAS and PAYG, reducing the risk your business will be hit with heavy penalties for late payments. ‘Failure to Lodge on Time’ penalties, or FLTs, increase every 28 days if not acted upon; so it’s vital that businesses seek assistance promptly.

Engaging with invoice factoring companies is another excellent approach to handling overdue debt. Invoice factoring is an under-utilised system that offers businesses the ability to access monies from unpaid invoices in advance. This improves cash flow and can expedite a business’s ability to repay debt.

It’s critical that businesses maintain an open line of communication with the ATO to allow a tailored payment plan to be formulated. Acting preemptively fosters a positive relationship with the tax office and reduces the risk that your business accumulates further fees or forms a bad credit score. Contacting a financial advisor is an excellent way of ensuring your obligations are met in a timely, stress-free manner.

References

Yun, J. ‘$21 Billion: Warning For Aussies In Debt To The ATO’, Yahoo! Finance, Online, 2021, https://au.finance.yahoo.com/news/ato-debt-sme-225347351.html (Accessed May 11, 2022)