Businesses with tax debts need to be aware that the ATO will now be able to disclose the details of their tax debts to credit ratings agencies, which could potentially affect the ability of the business to obtain finance or refinance existing debt. Generally, only businesses with an ABN and debts over $100,000 and that are not “effectively engaged” with the ATO will be affected. Practically, the ATO is planning a phased implementation which will consist of education before targeting companies, followed by partnerships, trusts and sole traders.

The ATO now has another “stick” in its arsenal to get businesses to engage with it and manage outstanding tax debts. Laws have been recently passed that allow the ATO to disclose tax debt information of businesses to registered credit reporting bureaus (CRBs).

The aim of the laws, according to the government, is to encourage more informed decision-making within the business community by making large overdue tax debts more visible, and to reduce the unfair advantage obtained by businesses that do not pay their tax on time.

The disclosure of these debts has the potential to affect the credit ratings of businesses and their ability to refinance existing debt, but only businesses that meet certain criteria will be subject to this new disclosure rule. The criteria are as follows:

• The business has an ABN and is not an excluded entity
• The business has one or more tax debts, of which at least $100,000 is overdue by more than 90 days
• The business is not effectively engaging with the ATO to manage its tax debt

When a business meets these criteria, the ATO is required to notify the business in writing and allow 28 days for the business to engage and take action before any debt is disclosed. Tax debt information will only be provided to CRBs that are registered with the ATO and have entered into an agreement detailing the terms of reporting.