On 24 July 2019, the Government introduced legislation which gives the Australian Taxation Office (ATO) the ability to disclose to credit reporting bureaus (CRBs) the tax debt information of businesses that do not pay their tax debts.
The proposed changes allow the Treasurer to declare a class of entities whose tax debt information may be disclosed to CRBs by the ATO. This information enables CRBs to prepare, update or issue credit worthiness reports in relation to any entity declared in the class of entities.
Entities that can be declared by the Treasurer:
- are registered in the Australian Business Register;
- have a tax debt, of which at least $100,000 is overdue for more than 90 days;
- are not excluded entities (deductible gift recipients, complying superannuation funds, registered charities or government entities);
- are not effectively engaging to manage their tax debt; and
- the ATO has taken reasonable steps to confirm that the Inspector-General of Taxation (IGT) does not have an active complaint from the entity that is, or could be, the subject of an investigation by the IGT relating to the ATO’s intention to disclose the tax debt information of the entity.
Even where an entity satisfies the above criteria for reporting, the ATO may decide not to report the tax debt information if the entity is experiencing exceptional circumstances (which may include a family tragedy, serious illness, impacts of a natural disaster and other circumstances but not relating to cash flow issues or financial hardship).
When an entity meets all the reporting criteria, the ATO will notify the entity of the intention to report the entity’s tax debt information. The ATO must notify the entity in writing within 21 days before reporting the tax debt information for the first time. During this period the entity can:
- pay its tax debt;
- effectively engage with the ATO to manage its tax debt by:
- entering into a payment arrangement;
- disputing the tax debt; or
- lodging a complaint with the IGT regarding the tax debt;
- request an ATO review if the entity disagrees that the criteria for reporting has been met; or
- contact the ATO to claim, and where necessary demonstrate, exceptional circumstances are being experienced; or
- make a complaint to the IGT in relation to the ATO’s intention to report the entity’s tax debt information.
Once an entity’s tax debt information has been reported, the ATO will send to CRBs regular updates on the balance of the entity’s overdue tax debts. The ATO will only supply tax debt information to registered CRBs. A registered CRB is a CRB which enters into an agreement with the ATO detailing the terms of the reporting.
If an entity no longer meets the criteria for reporting, the ATO will instruct the CRB to remove its tax debt information from public access and credit reports. The CRB must remove the tax debt information within 2 business days of receiving the ATO instruction.
The proposed changes will apply to disclosures of tax debt information on or after the Bill receives Royal Assent. The ATO released a consultation paper regarding ATO’s approach to the proposed changes. Consultation on this paper closed on 6 September 2019.