The ATO is seeing a limit to mateship
Traditionally Australians don’t dob in mates who do the right thing by them. But there’s a limit to mateship when they don’t, and the Australian Tax Office (ATO) is seeing increasing evidence of a reaction to this in the business community.
Business owners who meet their tax obligations are becoming increasingly vocal about those who don’t, especially when these businesses are in the same industry and therefore competing against them unfairly.
Commercial Director of Creditor Watch, Patrick Coghlan says the ATO, particularly in the past 12 months, is responding with increasing frequency to calls from complainants “by getting a little more serious and not allowing debt levels to get as high as they had previously before intervention”.
Pressure is increasing
As Australians’ tax debt soars, Mr Coghlan says there’s increasing pressure from business owners to rein in debt by businesses not meeting their tax obligations - for whatever the reason.
He says it’s unfair that healthy companies not paying their fair share of tax should be seen having to compete with those that do. It’s a situation made worse while they’re also battling to survive among unprofitable so-called zombie businesses that not only aren’t paying tax, but also by their continuing existence, act as a drag on the economy as a whole.
Mr Coghlan, although he doesn’t say it in so many words, clearly implies he readily understands business owners’ refusal to allow others who they believe are tax cheats to go unchallenged (especially competitors in the same industry).
However, he says unequivocally that he sees every justification for the ATO’s increasingly aggressive attitude towards businesses that avoid not only paying their taxes but also avoid contact with tax officers.
When paying tax is a problem
Tax officers will try to work with companies having trouble fulfilling tax obligations. Clearly it’s in the best interests of the nation’s economy they collect all money they can that’s owed to the Treasury, while at the same time trying to enable people to stay in business as on-going tax payers.
Macks Advisory believes Directors of a business struggling to pay tax owed should contact the ATO before tax officers feel compelled to contact them.
There are no hard and fast rules governing procedures the ATO takes in dealing with debtors. These are determined by a number of factors that include a company’s past record in paying tax owed, the amount of money owed, and the extent of debtors’ cooperation.
Furthermore, Directors should understand the longer they fail to contact an insolvency practitioner while allowing a company unable to pay debts to totter on the brink of insolvency, the worse it will be for the business and all associated with it.
Other side of the coin
Business owners should look not only internally for ways to enhance profitability or in tough times, to survive, they should, as suppliers and creditors, look externally at customers’ businesses that are sources of revenue flow.
If you’re a business owner or company director, keep yourself well informed about companies with which your business has connections. Be aware of who’s running them, how they’re trading, if they appear to be in financial difficulty, and whether they have connected businesses or related entities they can use to hide or offset trouble.
It’s worth maintaining a monitoring program of this kind, because while the business health of your company’s suppliers and creditors may seem fine right now, who’s to say how they’ll be travelling financially in six months or in a year from now.
For more information, contact Macks Advisory on 08 8231 3323 or visit our office on Level 8 West Wing, 50 Grenfell Street, Adelaide SA 5000.
