In its Mid-Year Economic and Fiscal Outlook in 2016–2017, the Federal Government announced that it would change the law so the ATO could report business tax debt information to credit reporting bureaus (CRBs) where a business consistently does not engage with the ATO to manage a tax debt. It is not currently authorised to report information about tax debt avoidance, because the law contains strict confidentiality requirements for ATO-held taxpayer information.
The ATO has said it “recognises the important role businesses play in the Australian economy [but] when an entity avoids paying its tax debts it can have a significant impact on other businesses, employees, contractors and the wider community.”
The new paper aims to facilitate the consultation process between the ATO, businesses and CRBs, and focuses on the administrative approach the ATO proposes to take once the legislative changes are in place. It also helps explain some aspects of the changes under the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No 1) Bill 2019 (which has passed the House of Representatives without amendment and is currently before the Senate) and the draft legislative instrument, the Draft Taxation Administration (Tax Debt Information Disclosure) Declaration 2019).
If passed in its current form, the Bill will amend the Taxation Administration Act 1953 (TAA 1953) to allow taxation officers to disclose information about business tax debts to CRBs when certain conditions and safeguards are satisfied. The business in question would need to have debt of at least $100,000 overdue by more than 90 days, and have not effectively engaged with the ATO to manage that debt.
The consultation paper sets out the following key practical points:
• Implementation – Under the ATO’s phased implementation approach, the changes will be implemented gradually to ensure that systems, safeguards and processes are robust.
• Whose tax debt may be reported? – The ATO will be permitted, but not required, to report tax debt information about an entity to CRBs where it meets all of the following criteria:
- the entity has an ABN and is not an excluded entity (the ABN and excluded entity test);
- the entity has one or more tax debts totalling at least $100,000, and the amount has been due and payable for (overdue by) more than 90 days (the debt threshold test);
- in determining whether the entity has debts that meet the debt threshold test, the ATO must exclude tax debt amounts that the entity has engaged with the ATO to manage (the effective engagement test); and
- the entity must not have an active complaint with the Inspector-General of Taxation concerning the proposed reporting or reporting of the tax debt information.
• How will businesses be notified? – If all of the reporting criteria are met and the ATO intends to report an entity’s tax debt information to CRBs, the ATO will notify the business in writing at least 21 days before reporting its tax debt information for the first time. This is to allow an additional 21 days for the business to take action (e.g. by engaging with the ATO and/or paying the debt) to prevent its tax debt information from being reported.
• What will be reported? – If a business’s tax debt information is reported to CRBs, the ATO will provide the CRBs with the following:
- unique identifiers for the entity, such as the ABN and legal name;
- the balance of the entity’s overdue tax debts at the time of first reporting;
- regular updates on the balance of the entity’s overdue tax debt until the entity no longer meets the reporting criteria; and
- a notification when the entity no longer meets the reporting criteria.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 14 Russell Street Toowoomba.