Small Business Tax Debt on the Rise
The old saying there are two certainties in life: death and taxes.
The second part of that equation is looking less certain, with small businesses owing about $12.45 billion in tax.
A July 2015 report from the inspector-general of taxation, Ali Naroozi, has found that the amount of money owing to the Australian Federal Government is rising fast, despite revealing a large number of complaints about aggressive debt collection practices.
ATO data shows collectable tax debt hit $20 billion in 2013-14, of which approximately 60% is owed by small businesses.
It is the smallest of small businesses that accounts for the lion’s share of the debt, with “micro businesses” that have turnover under $500,000 making up three-quarters of the small business debts.
One of the biggest mistakes a small business owner can make is to think they can tough out their cash flow problems and keep the ATO in the dark.
So what should you do if you have an ATO debt that you can’t repay?
- Plan ahead – prepare a detailed and accurate cash flow budget that shows on a monthly basis where the cash flow in is coming from and where it will be spent, including how you will repay the current tax debt and pay future tax obligations
- Don’t do a runner – If you are unable to pay your tax debt, contact your tax agent before the payment deadline so that a payment arrangement can be organised.
- Keep your lodgements up to date – even if you are unable to make payment. There is a direct correlation between people who don’t lodge forms and the difficulty the ATO has in recovering these debts. The ATO will be more open to putting a payment arrangement in place if you are maintaining your lodgement obligations.
- Seek advice – keep your business’s financial situation front of mind and seek help from your accountant