Small and medium-sized businesses (SMBs) in Australia are being reminded by the country’s tax office that owing money to the agency is not OK, Broker News reported Friday (Feb. 14).
The national business funder Scottish Pacific said in a press release Thursday (Feb. 13) that SMBs will soon face new risks for holding off on tax payments and using the Australia Tax Office (ATO) “as a bank.”
Wayne Smith, a senior executive at Scottish Pacific, said many business owners don’t know about a new law passed last year that empowers the ATO to alert credit reporting agencies about late and unpaid tax debt.
He said businesses that serve as advisors to SMBs, along with accountants and brokers, should all make sure business owners know the law.
The new law gives the ATO the ability to provide credit reporting agencies with tax debt information for any businesses that owe in excess of $100,000 in taxes, are behind more than three months, or have not created a repayment plan with the ATO.
“Traditionally, many [SMBs] have used the ATO almost like a ‘line of credit’ by not paying their commitments on time,” Smith said.
The new law provides businesses with even more incentives not to rack up debts with the ATO, said Smith.
“This action will now likely have an adverse impact on credit ratings and credit insurance limits, making it harder to maintain or extend credit terms with suppliers,” he added.
Smith said SMBs should use the “post-Christmas, pre-February BAS” time to take the opportunity to consider their cash flow management and working capital arrangements.
“We’d encourage business owners to invest time with their funder, whether it be a non-bank like Scottish Pacific or a bank, or with their broker or accountant, to really consider what is the most appropriate form of funding for their business situation, and get that funding in place so they don’t end up on the wrong side of this credit reporting initiative,” he said.
In other news, the ATO said in August it was in favor of doing away with paper invoices and moving to electronic invoices.