Two recent significant credit management developments offer the prospect of help and relief for business, especially small business, in the New Year:
- The Australian Taxation Office (ATO) reporting to registered Credit Reporting Bureaus (CRBs).
- Speedier payments from Federal Government agencies.
Transparency of tax debt measure
In its mid 2016-2017 Mid-Year Economic and Fiscal Outlook, the Government announced that the ATO will be allowed to report to CRBs the tax debt information of businesses that do not effectively engage with the ATO to manage their tax debt.
The ATO is currently not allowed to report such information under the confidentiality of taxpayer information provisions.
The ATO will only be able to disclose tax debt information of a business where certain criteria are met.
While the specific circumstances and exceptions for disclosure will be subject to public consultation and confirmed through the passage of law, the current intention is that the ATO will only disclose tax debt information of a business to CRBs if the business meets all of the following criteria:
- It has an Australian Business Number (ABN);
- It has a tax debt of at least $10,000 that is overdue by more than 90 days; and
- It has not effectively engaged with the ATO to manage its tax debt.
The obvious purpose of the introduction of the measure is to support more informed decision making in the business community and reduce the unfair advantage gained by businesses that do not pay their tax on time. It may even encourage certain businesses to better manage their tax responsibilities.
The definition of effective engagement (see point (iii) above) will be subject to public consultation but it is expected to include businesses who have established a payment arrangement with the ATO or are disputing their tax-related liabilities.
Further, it is proposed that default information is subsequently removed as if it never occurred once the tax debt is subject to a dispute, payment arrangement or paid in full. The Australian Institute of Credit Management (AICM) has made a strong recommendation to the ATO that defaults remain on credit reports notwithstanding subsequent action by the business unless listed in error or extenuating circumstances exist.
The intention is that the ATO will notify a business if they meet the reporting criteria, advising that they have 21 days to respond before their tax debt information is reported to CRBs.
This upcoming measure is not yet law and is subject to the normal parliamentary process.
Expeditious Government payments
Following a concerted campaign from small business advocates for better payment terms on invoices issued to bigger organisations, in November 2017 Prime Minister Malcolm Turnbull has confirmed that Federal Government agencies will move to pay invoices for contracts less than $1million within 20 calendar days.
There are estimated to be 7,000 small businesses (ranging from tradies to gardeners and others providing specialist services) who do business with Federal Government agencies, who will be better off as a result of the initiative.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said the introduction of faster payment terms was a “game changer for small businesses … that provide goods and services to the Government.”
Small business lobby groups hope that the Government’s move to improve payment terms will send a message to big companies to desist, where they do so, in the exploitation of their smaller and vulnerable suppliers.
So in an increasingly competitive and uncertain world, two positive initiatives for business in 2018.
Finally, a good news story!
December 2017