Outstanding Tax Liabilities May Impact Credit Rating
The ATO has announced that from 1 July 2017 they can disclose to Credit Rating Agencies the tax debt information of businesses that have not effectively engaged with the ATO to manage those debts.
This is one of the many strategies the ATO will be employing to nudge directors to engage early with the ATO should they have problems meeting their tax obligations. An initiative which the ATO aims to reduce the current total outstanding tax debt of circa $19 billion (small business accounts for 65% of this debt).
This disclosure to Credit Ratings agencies is likely to have a significant impact, however, on businesses that rely on their credit rating to:
- negotiate credit terms with their suppliers. Credit controllers may now be more vigilant on credit provided due to risk associated with a customer with a poor credit rating.
- tender for up-coming work. A poor credit rating may impact on a business’s ability to win work. Pricing may now become more competitive as risk may now be built into tenders.
Businesses who are proactive with their communication with the ATO are unlikely to be affected by these changes.
Early intervention is the key to managing and avoiding this potential risk.