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The Institute of Public Accountants has urged the government to include some important safeguards in its newly proposed business tax debt transparency laws, warning of potential harm to small businesses.
Exposure draft legislation for the transparency of business tax debts was released last month, aiming to allow the ATO to disclose business tax debts to credit reporting bureaus where the businesses have not effectively engaged with the tax office to manage their debt.
IPA chief executive Andrew Conway said that while he was generally supportive of the proposed law, he was concerned of the holding of data by private credit bureaus after an individual’s tax debt has been cleared.
“There will be a requirement for a credit agency to remove reference to a business tax debtor within two days of the debt being settled but this requirement is left to the administrative powers of the ATO and is not currently in the proposed legislation,” said Mr Conway.
“We argue strongly that this safeguard be legislated and not left to the administration practices of the ATO.
“If a credit agency does not remove the record, it may prevent a small business gaining finance from a lender at a critical time of their business activity,” he added.
“Lenders will often seek information in relation to a small business’ tax debt and if this remains on the credit bureau’s books, it will unfairly jeopardise that business when the debt in fact has been paid. This critical safeguard must form part of the legislation.”
Earlier, IPA senior tax adviser Tony Greco warned that some small businesses might be caught off-guard by the proposed measures.
“If a business is heavily reliant on trade credit from suppliers and once that information becomes transparent, then they might find themselves with creditors who may decline credit going forward unless those debts are brought to account,” said Mr Greco.
“So it can impact quite significantly on some businesses, purely because those suppliers of credit may not be aware of the total amount of debt that the business might have incurred so for some businesses it is going to be a big wake-up call when credit is no longer provided and if they are reliant on that trade credit, it is going to have a significant impact on their operations.”