Owe money to the Australian Tax Office (ATO)? It’s time to start sweating.
Money owed to the tax office has blown out by 21 per cent in just four years.
Sitting at $35.3 billion, that’s more than half of the annual GST take and more than both the annual education and defence budgets.
Which is why the ATO has tightened its belt and has begun to put into practice what it preaches.
The ATO’s new debt collection strategy focuses on “making it as easy as possible for businesses and individuals to understand and meet their tax obligations, including paying debts” – AKA if you owe him money the taxman is coming for you.
Many business owners are unaware of how detrimental a tax debt can be for your business.
Banks hate tax debts, so if you’re looking to get a loan it’s likely the bank won’t give you one if you have a tax debt.
The Australia Prudential Regulation Authority (APRA), the regulator of financial institutions, has determined that banks can’t loan money to companies and individuals with a tax debt.
Changes to superannuation payments have also made it easier for the ATO to know if you haven’t serviced a tax debt.
The new SuperStream process for paying superannuation alerts the ATO if you haven’t paid your employees’ super.
Historically, the only way the ATO could know if you haven’t paid your employees’ super was if your employees alerted the tax office themselves.
If you’re not careful about meeting your tax obligations, the ATO can fine you and take the money out of your personal account as director of the company.
But it’s not all doom and gloom.
The ATO has put in place measures to educate businesses and individuals on their tax obligations and have created clearer pathways of informing people of their debt.
They recognise that even viable, well-run businesses occasionally experience short-term cash flow difficulties and the ATO has vowed to work with businesses in trouble to meet their obligations.
This can be through payment arrangements, remission of interest and hardship provisions.
The ATO is now contacting businesses more frequently in the early stages of their arrears.
But to safeguard against any possible fine from the ATO, MWM urges businesses to ensure they have access to correct, up-to-date information from their financial software.
Accurate reporting is a must to avoid a knock on the door from the ATO.
It’s also important that businesses understand that the laws haven’t changed – the rules are the same as they have always been, but the ATO is now enforcing them.
If you’re worried you’re at risk, contact your MWM accountant today. We can ensure you’re meeting your obligations. Call 07 5596 9070.