ATO Transparency of tax debt measure
The proposed Transparency of tax debt (TOTD) measure will require new law to allow the ATO to report tax debt information of businesses to CRBs.
The measure will commence when the new law is given royal assent.
In the 2016–2017 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced that the ATO will be allowed to report to registered credit reporting bureaus (CRBs) the tax debt information of businesses that do not effectively engage with us to manage those debts. The ATO is currently not allowed to report this information under the confidentiality of taxpayer information provisions.
The TOTD measure is designed to:
- Support more informed decision-making in the business community by making unpaid tax debts visible. This will enable businesses and credit providers to make a more complete assessment of the creditworthiness of a business when they consider extending credit or terms of trade. Currently, the first time creditors may learn that a business has overdue tax debts is when another creditor or the ATO commences legal action to recover the debt.
- Reduce unfair advantage obtained by businesses that do not pay their tax on time. These businesses may have a competitive advantage over businesses that comply with their obligations.
- Encourage businesses to engage with the ATO to manage their tax debts and, where an entity is unable to pay a tax debt in full, enter into a sustainable payment plan that is agreed between the tax office and the business.
Generally, this measure is intended to apply to businesses with an Australian business number (unless they are specifically excluded) with a tax debt, of which at least $10,000 is overdue by more than 90 days. Businesses are encouraged to engage with the ATO and pay debts in a timely manner to avoid credit reporting.
The ATO recognises the important role businesses play in the Australian economy. When a business avoids paying its debts it has an impact on other businesses, employees, contractors and their families.
The TOTD measure permits but does not require the ATO to report the tax debt information of businesses to CRBs. This is subject to safeguards, including an independent review process.