ATO’s new credit rating crackdown pushes small businesses to pay tax debts

The Australian Taxation Office (ATO) is cracking the whip on small businesses who haven’t been keeping up with their tax payments by posing a threat to their credit ratings.

Thanks to laws passed last year, the ATO can now reveal small businesses’ tax debt to credit reporting agencies should the business meet the following criteria: 

  • The business has more than $100,000 in tax debt 
  • The business has an ABN 
  • The business is more than 90 days in arrears
  • The business hasn’t set up a payment arrangement or negotiated one 

And according to national business funder, Scottish Pacific, many business owners don’t know about it.  

“Traditionally, many SMEs have used the ATO almost like a ‘line of credit’ by not paying their commitments on time,” said Wayne Smith, Scottish Pacific’s Senior Executive.

“It’s not the best option but if a business is tight for cash they often make a decision to pay other creditors and delay paying the ATO, thinking they will eventually put a payment arrangement in place." 

Smith went on to say the new laws will give Aussie businesses a bigger push to avoid accruing tax debt with the ATO. 

“This action will now likely have an adverse impact on credit ratings and credit insurance limits, making it harder to maintain or extend credit terms with suppliers.”

RELATED ARTICLE: How online marketplaces can help your business grow 

But will coughing up funds for paying tax on time disrupt businesses’ cash flow?   

Over a quarter of Aussie businesses think yes.

In Scottish Pacific’s most recent SME Growth Index, it found that 27.8% of respondents said meeting tax payments promptly would create cash flow issues in their business. 

But Mr Smith warns that the new laws are a clear message from the ATO that businesses must stop viewing it as a line of credit. 

“With forecasts for a poor economic outlook in 2020, if ever there was a time to make sure you have a sustainable funding structure in place for your business, that time is now.” he said. 

What options are there to fund my business and improve cash flow? 

There are plenty of ways to help your business financially so you can see it prosper and grow. Here’s a handful of financial products you could consider:

  • Business loan: As the most popular option for Aussie business owners, business loans offer flexibility with a range of borrowing limits and loan terms. It’s worth comparing various lenders to find a competitive rate, as well as minimal fees and any bonus features on offer. 
  • Merchant cash advance: This can be an alternative to a loan, as a lump sum cash advance payment you’ll receive from a lender upfront. Over time you pay down your loan amount and the lender receives an agreed upon percentage of the business transactions. Keep in mind though, there is generally a fee associated with this option.  
  • Invoice finance: When it comes to maintaining cash flow, this could be an option to help it. Invoice finance allows businesses to receive up to 95% of an invoice amount from a lender straight off the bat, then the remaining amount once the invoice comes through (minus a fee or charge).  
  • Lines of credit: If you need a funding option to have at your disposal on an ongoing basis, this could be a good alternative to a standard business loan. With this option you can dip into the funds when you need it, and you’ll only pay interest on the amount you actually drew on.     

RELATED ARTICLE: 5 types of business finance to grow your business in 2020 

Ready to start reviewing your business’ funding? Check out our business loans comparison table or head over to our guides page for more handy tips on all things small business finance.

Business Loans 2020 - rates updated daily

Search promoted business loans below or do a full Mozo database search. Advertiser disclosure.

Refine the list of business loans

Let’s help find you a great business loan...
  • Featured Product
    Boost Business Loan

    Whether you’re looking for a quick cash boost for your business or are ready to invest in growth, ScotPac offers a range of unsecured and secured loans from $10,000 up to $500,000. For loan terms of 6 months to 3 years. No application or account keeping fees to pay. Funds available in 24 hours or less once approved. Repayment options available.

    Interest Rate
    Upfront Fee
    Funding speed
    On application
    Details on application
    From 24 hours
    Details
  • Business+ Unsecured Loan

    A simple way to fund your business’s big plans. Borrow up to $50,000 without using your assets as security. A fixed interest rate means your repayments don’t change over the life of the loan. Apply in minutes with the Business app. Enjoy a fast approval process. $495 establishment fee.

    Interest Rate
    Upfront Fee
    Funding speed
    Rates range from 11.95% p.a. to 22.95% p.a.
    $495
    Varies
    Details
  • Unsecured Business Loan

    Business Loans from $5,000 to $5,000,000 with high approval rates. Access to funds on loans up to $500,000 in as little as 3 hours. Cash flow friendly repayments and open minded offers.

    Interest Rate
    Upfront Fee
    Funding speed
    On Application
    3%, starting at $399
    from 3 hours
    Details
  • Unsecured Business Loan

    A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.

    Interest Rate
    Upfront Fee
    Funding speed
    from 9%
    -
    Within same day
    Details
  • Business+ Unsecured Overdraft

    Manage the cash flow in your business with ease. Access up to $50,000 without using your assets as security. Lending criteria apply. Access your available limit from your linked Business+ Account. Use your Debit Mastercard for added convenience. Interest is charged on your balance owing, not your limit. Easy online application. $495 establishment fee.

    Interest Rate
    Upfront Fee
    Funding speed
    Rates range from 14.95% p.a. to 25.95% p.a.
    $495
    Varies
    Details

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.