The Federal Government is proposing to give the Australian Taxation Office (ATO) new powers to report the outstanding tax debts of self-employed and small businesses to credit reporting bureaus.
The measure was announced after the federal government revealed $1.7billion of tax debt remains unpaid by small businesses across Australia.
For many Australians, this new power won’t have any impact on their day-to-day lives. However, for small business owners or self-employed workers with outstanding tax debts, it could have serious implications on their future borrowing capacity.
Who will this affect?
It is proposed that This new reporting power will apply to ABN holders with a tax debt of more than $10,000 that is at least 90 days overdue who have not done anything to engage with the ATO on those tax debts. It is anticipated that those businesses that have established a payment plan with the ATO or are disputing their tax debts will be excluded from this new reporting regime.
Why is this important?
In any application for finance, a lender relies on the contents of the applicant’s credit report to help assess their credit worthiness. If there are any defaults listed in the credit report, or in this case there is a notation that the applicant has an outstanding tax debt, then the lender may deem the applicant unsuitable and decline the loan. To learn more about credit files, read our blog on it here.
How long do defaults stay on your file?
Defaults remain on credit reports for 5 years. More serious credit infringements such as bankruptcy and insolvency remain listed for 7 years. If you are worried about whether notations listed on your credit report are likely to impact your ability to get a loan, speak to your Liberty Adviser.
Consolidate debts to stay on top of your tax payments.
While it remains to be seen how the ATO will exercise these new powers, for those business owners who are currently behind on their tax payments, now is the time to act. An important first step will be to engage with the ATO on those outstanding tax debts.
It may also be useful to explore ways to release equity from your home and clear any unpaid taxes to ensure it doesn’t become a much bigger problem.
Remember, there are flexible lenders in the market open to consolidating lots of different types of debt – including tax debt. Your local Liberty Adviser has access to market-leading debt consolidation products and can guide you to find a suitable solution.
To find your nearest Liberty Adviser here.