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ATO employs new tactic to collect tax debts

Alf Couceiro
Published by:
Alf Couceiro
Published on:
September 26, 2021
ATO employs new tactic to collect tax debts

Following a COVID-19 grace period, the Australian Taxation Office (ATO) has stepped up its efforts to collect tax debts.

It recently started sending orange-coloured letters to businesses with tax debts of more than $100,000 that are at least 90 days overdue.

In the letter the ATO warns those businesses that, unless they make an effort to manage their debt within 28 days, the ATO will disclose the debt to credit-reporting bureaus (CRBs).

The warning letters are a product of new powers the ATO was given in late-2019 to clamp down on businesses with tax debts.

In recognition of how COVID-19 restrictions have reduced businesses’ cash flows, the ATO has taken a more relaxed attitude to tax collection throughout 2020 and much of 2021.

But as more people get vaccinated and business conditions improve, the ATO is starting to get tougher.

Though the ATO has sent letters to some businesses, at the time of writing it hadn’t divulged their tax debts to any CRBs.

“The ATO has contacted a small number of businesses…requesting that they take action to pay their debt or set up a payment plan,” the agency confirmed.

“Businesses that are actively working with the ATO to manage their tax debt will not be reported to credit reporting bureaus.”

Business credit scores

If the ATO does disclose businesses’ tax debts to the CRBs, it’s likely to harm those businesses’ credit scores.

Credit scores are an indicator of the financial health of your business.

They’re used by banks and online lenders to assess the risk of lending to your business.

They’re also used by suppliers to confirm whether you can be relied on to pay your invoices in full and on time.

A bad credit score can make it difficult for your business to get finance and force you to pay suppliers upfront or upon delivery.

Even if you can’t pay your tax bill by the due date, we recommend you at least lodge your activity statements and tax returns with the ATO on time.

That way you’ll avoid a penalty for failing to lodge on time and the ATO will know you’re aware of your obligations.

Be aware that you’re charged interest on your debt, so it will grow each day it goes unpaid. The ATO can also use any tax refunds or credits you’re owed to reduce your debt.

Get expert advice

Have a tax debt and want to set up a payment plan with the ATO?

Need help figuring out the size of the regular instalments your business can afford to pay the agency?

Contact us for a complimentary consultation at or 1300 888 803. We’ll take care of you.

IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (VIC) Pty Ltd ACN 145 368 850. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (VIC) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (VIC) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (VIC) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (VIC) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.

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