The ATO may be able to report your unpaid tax debt to credit reporting agencies

A few months ago, someone asked me whether the ATO could report a tax debt to a credit reporting agency. I thought “great question!” and wrote an article about it.

The answer, at that stage, was “no – not until the ATO has a judgment against you”. My article explained all the reasons why the ATO couldn’t report your debt to a credit reporting agency.

Unfortunately, that’s all changed. The Government has announced that, from 1 July 2017, the ATO can report a business that has a tax debt of over $10,000 to credit reporting agencies. However, this new law is taking a while to be introduced – as at 30 September 2018, it has still not been implemented.

What’s prompted the change?

There used to be secrecy provisions that stopped the ATO from disclosing your tax debt to anyone. In early 2014, the ATO suggested to Parliament that the government should change this. The ATO wanted to be able to tell credit reporting agencies about tax debts.

The ATO said that this could help it to collect the $18 billion of tax debt owed by small to medium businesses.

It looks like the government has listened. It announced a change on the 19th December of 2016 in its ‘Mid-Year Economic and Fiscal Outlook’.

Tucked away in that 292-page report was this:

From 1 July 2017, the Government will allow the ATO to disclose to Credit Reporting Bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts. The ATO does not currently provide this information.

This measure will initially only apply to businesses with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue.

As as 30 September 2018, this legislation was yet to pass through Parliament, but it is expected to become law at some stage.

What does the change mean?

Once the ATO is granted this new power, it will be able to report your business debt of over $10,000 to credit reporting agencies. The ATO has indicated that it will only use this power if a business is still “disengaged” after the ATO has exhaustively pursued its pre-litigation procedures (e.g. by sending final warning letters, garnishee notices, etc).

So you should not ignore the ATO’s attempts to collect your business tax debt. If you do, the ATO can record your non-payment on your credit file. This will have immediate and lasting consequences for your business.

How long does your unpaid tax debt stay on your credit file?

A credit default is a black mark that lasts on a commercial credit rating file for five years.

It’s very difficult to have the default removed once the ATO has added it to your file. Usually, a default is only removed if you can show that it is wrong and should not be on your file.

It’s important to know that paying the debt once it is on your credit file will not remove the default. It will still stay on your file for 5 years, regardless of payment.

What’s the impact of this?

The listing of a tax debt on your business’s credit report can have a significant impact on your business.

It can make it very difficult for your business to access funding from banks and other lenders. They will access your credit file and see that you didn’t pay the ATO on time. They will use this against you and say that it is risky to lend to you. If they do agree to lend to you, it likely that you’ll be paying a higher rate of interest.
Other businesses might also refuse to extend credit to you because of the listing of the default. Getting trade accounts with suppliers could become a lot more difficult.

What can you do?

We will have to wait and see how the ATO will use this new power once the law is passed. I expect that some guidelines will be issued by the ATO before it uses the power.

In the meantime, if your tax debt is over $10,000, then the best thing you can do is to engage with the ATO about how you plan to pay it.

I know this can be a scary prospect and that it can be difficult to know where you stand with the ATO. But burying your head in the sand won’t help. You need to address the debt now, before the ATO takes more serious action that can affect your ability to run your business.

If you need some advice on how to approach the ATO, or you would like me to approach them for you, then please contact me for a chat about how I can help you.

About Hartigan Law

I am a specialist tax disputes lawyer with over a decade of experience in dealing with the ATO.

I have helped many clients to receive interest and penalty remissions, to object to and appeal the ATO’s decisions and to reach settlements on disputed tax amounts. I also represent clients in court when they are charged with tax related crimes.

I work with clients all over Australia and internationally. I can do this because the tax issues I deal with are Federal – the law is the same no matter where in Australia you live.

I can be contacted on 1300 75 84 84 or at