Restarting Your Business in the Shadow of “Covid” Debt


As businesses are re-emerging from COVID affected trading conditions, the ATO has signaled its intent to highlight non-compliant taxpayers.

Whilst the ATO has to date restrained from instituting recovery action, providing a reprieve for businesses. This has also meant that non-viable businesses remain in the marketplace.

The ATO have been accommodating to businesses wishing to enter into repayment arrangements alleviating the immediate cashflow pressure. However this will result in extra repayments being required to be made together with current liabilities when businesses are trying to re establish themselves.

The ATO’s collectible debt has hit a record high of $34.1 billion for 2019-2020, the operative word being “collectible”.  It also pays to be cognisant of the fact that since 2019 the ATO has had the ability to report businesses to credit reporting agencies in certain circumstances.

Businesses tax debts can be reported by the ATO to credit reporting agencies if they:

  • Have an ABN
  • Owe over $100,000 in tax
  • Are in arrears by 90 days
  • Are not actively engaging the ATO or do not have a payment plan in place

Prior to reporting to credit agencies the ATO will write to the company advising them of their intent and providing them with 28 days to take relevant action.

The impact on businesses of having a poor credit report include potentially limiting finance options and sparking supplier concerns as credit reports are publicly accessible. Information on credit scores and tips can be found here.   This could prove especially problematic if a business requires external finance to inject working capital into the business as they open up.

The ATO debt threshold for credit reporting includes all the usual income tax and activity statement debt, but also superannuation debt and penalties and interest charges. See how the ATO report to the credit agencies here.

At some stage, businesses will return to normal, however it is likely that normal revenue will be less than pre pandemic turnover in the short term. Further, it is likely that working capital requirements will be greater as in addition to the current debts being required to be met, so will those “COVID” debts that were deferred, such as finance facilities, rent and trade suppliers.

Additionally, when considering cashflow requirements, the ATOs general interest charge (GIC) is currently over 7% per annum.

Opening up confidently means crunching those numbers on revenues of pre-pandemic levels, give debt attention and seek early advice to maximise the options available.

Reminder: Be sure that directors continue to lodge activity statements and SGC statements at all times to avoid automatic personal liability.  Personal liability of directors for ATO Debts via a Director Penalty Notice will be addressed in more detail in the next blog.

Getting started…

  • Identify the debts and deferred debt
  • Engage and communicate with the ATO, accountants and clients, build on the relationships
  • Deal with all stakeholders to align cashflow with obligations and re-emerge strong

Collaboration is key, we are here, together with our broad network of advisors including:

  • Specialist tax debt negotiators
  • Accountants
  • Lawyers
  • Financiers
  • Business Advisors

just to name a few

If you are wondering what the future holds, how your debts are going to be met? what your cashflows may look like?  The time to talk to your accountant or trusted advisor is NOW!  Good early advice, means more options and clear pathways forward often removing the stress of the unknown.

As always do not hesitate to speak to any one of our six registered liquidators and two bankruptcy trustee’s should you have queries on personal or corporate – solvency, insolvency, restructuring and turnaround.  All our details are on our website at