Adrian Abbott, Chartered Tax Advisor at Sydney Tax Advisory, and Gregory Ross, LLB Accredited Specialist at Eakin McCaffery Cox, discuss the legislation introduced on 24 July 2019 by Michael Sukkar, Assistant Treasurer, which gives the ATO the right to disclose to credit reporting bureaus, details of taxpayers.
“Carrying on a business or similar venture with total tax debts exceeding $100,000 for more than 90 days and who fail to effectively engage with the Commissioner”.
The exposure draft instrument is “Taxation Administration (Tax Debt Information Disclosure) Declaration 2019 and is made pursuant to “Taxation Administration Act 1953“.
It might be described as a name and shame tactic to force payment.
The Vagaries in Wording Used in the Instrument
So, the concept is taxpayers who are carrying on a business “or similar venture” whatever that means, with a total tax debt exceeding $100,000 for more than 90 days and who “Failed to effectively engage with the Commissioner” whatever that means, can have that tax debt information disclosed.
The Impact Commercially
From a commercial point of view, this legislation is destructive for all business.
To have tax debts of 90 days effectively published to the general public through credit reporting bureaus, will stifle credit availability and depending upon lending covenants, may force the foreclosure on existing loans.
The consequences of this legislation has not been thought through.
What to Do!
With these new disclosure powers coupled with the use of garnishee notices and director penalty notices, there is a greater imperative than ever to make early contact with the ATO.
Affected businesses will need dispute resolution specialists.
The use of the ATO voluntary administration process will become more and more the norm.
“Tax debts” that are excluded from total “tax debts” and not to be disclosed to credit reporting bureaus include entities that:
- Have lodged a taxation objection
- The objection has not been determined
- The entity has applied to the Administrative Appeals Tribunal for review, or appeal to the Federal Court and such review, or appeal has not been withdrawn or refused and such proceedings have not come to an end.
There are special provisions relating to an entity subject to the Superannuation Industry (Supervision) Act 1993 and separate consideration needs to be given to deductible gift recipients, registered charities or Government entities.
The text of the paper is only a summary and discussion of particular facts and principles. It is not to be taken as legal or commercial advice as to any particular factual circumstances.
LLB, BEc, FCIS, FGIA, FCA, CTA
Chartered Tax Advisor
Sydney Tax Advisory
LLB Accredited Specialist
Government and Administrative Law
Eakin McCaffery Cox