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  • Transparency of tax debt measure

    In the 2016–2017 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced that we will be allowed to report to registered credit reporting bureaus (CRBs) the tax debt information of businesses that do not effectively engage with us to manage those debts. We are currently not allowed to report this information under the confidentiality of taxpayer information provisions.

    The proposed Transparency of tax debt (TOTD) measure will require new law to allow us to report tax debt information of businesses to CRBs. The measure will commence when the new law is given royal assent.

    The TOTD measure is designed to:

    • support more informed decision-making in the business community by making unpaid tax debts visible. This will enable businesses and credit providers to make a more complete assessment of the creditworthiness of a business when they consider extending credit or terms of trade. Currently, the first time creditors may learn that a business has overdue tax debts is when another creditor or the ATO commences legal action to recover the debt.
    • reduce unfair advantage obtained by businesses that do not pay their tax on time. These businesses may have a competitive advantage over businesses who comply with their obligations.
    • encourage businesses to engage with us to manage their tax debts and, where an entity is unable to pay a tax debt in full, enter into a sustainable payment plan that is agreed between us and the business.

    Generally, this measure is intended to apply to businesses with an Australian business number (unless they are specifically excluded) with a tax debt, of which at least $100,000 is overdue by more than 90 days. Businesses are encouraged to engage with us and pay debts in a timely manner to avoid credit reporting.

    We recognise the important role businesses play in the Australian economy. When a business avoids paying its debts it has an impact on other businesses, employees, contractors and their families.

    The TOTD measure permits but does not require us to report the tax debt information of businesses to CRBs. This is subject to safeguards, including an independent review process.

    Following community consultation, and the development of the exposure draft legislation, we will publish a Practical compliance guidelines explaining how this measure will be administered, who it will affect, and how to avoid having debts that will be reported.

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    Frequently asked questions

    How is the ATO consulting on the TOTD measure?

    In conjunction with Treasury, we have and will continue to consult with the community (including businesses, industry groups and associations) to ensure the proposed measure is implemented and administered effectively. Queries can be directed to

    When will the TOTD measure take effect?

    The TOTD measure will require new law to allow us to report tax debt information of businesses to CRBs. The measure will commence when the new law is given royal assent and comes into effect.

    How will the TOTD measure be implemented?

    Once the law comes into effect, implementation will occur gradually, ensuring the design, safeguards and systems are robust. The reporting regime will initially focus on companies that meet the reporting criteria. This will give time for other businesses to be aware of the new measure, and recognise the impact of reporting on both business activities and personal affairs. During the implementation period, we will (among other things) continue awareness and communication activities such as newsletters, articles, forums and speeches.

    What are the criteria for reporting tax debt information?

    We will have the discretion, but will not be obliged, to report the tax debt information of a business to registered CRBs where the business meets all the following criteria:

    1. Has an ABN and is not an excluded entity.
    2. Has a tax debt, of which at least $100,000 is overdue by more than 90 days.
    3. Has not effectively engaged with the ATO to manage its debts.

    Even where a business satisfies all of the reporting criteria, we may decide not to report its tax debt information in exceptional circumstances.

    What if a business has exceptional circumstances?

    We understand that most businesses pay their tax on time and manage their tax debts, but that some are unable to do so because of exceptional circumstances outside their control.

    Where a business is experiencing family tragedy, serious illness, impacts of a natural disaster or other exceptional circumstances, it may be able to claim a temporary reprieve from reporting.

    Exceptional circumstances do not include cash flow issues or financial difficulties. If a business is experiencing cash flow issues or financial difficulties that prevents it from managing its tax debts, the business should contact us to discuss the options available.

    Will a business be notified before we report its tax debt to a CRB?

    We will notify businesses that meet the criteria for reporting at least 21 days before their tax debt information is reported for the first time. This will give businesses 21 days to take action to prevent their tax debt information from being reported.

    Once an entity’s tax debt information is reported, we will continue to send regular updates on the balance of the overdue tax debts to the CRBs. Businesses will not receive notification of these updates, as it is expected they are aware of any changes to payments and new liabilities that impact on their tax debts.

    How can a business avoid being reported?

    The easiest and best way for a business to avoid being reported is to pay the overdue debt.

    Alternatively, businesses that effectively engage with us to manage their tax debt will not be reported. There will be public consultation on what it means to be effectively engaged with us.

    There are a number of other ways a business can effectively engage with the ATO to manage its tax debts and avoid having them reported. However, a business will likely be considered to be ‘effectively engaged’ if it:

    • has a payment plan in place and is meeting the terms of the payment plan
    • has lodged a Part IVC objection against an ATO decision to which the tax debt relates
    • has applied to the Administrative Appeals Tribunal for review, or appealed to the Court against a decision to which the tax debt relates, or
    • is participating in an internal review or a dispute resolution process in connection with the tax debt.

    Can a business request a review before its tax debt information is reported to CRBs?

    As a safeguard, a business will have access to an independent ATO review process if it disagrees that it meets the criteria for reporting or if they have exceptional circumstances. A business will have 21 days from receiving the notification to request an independent ATO review.

    If a business is dissatisfied with the outcome of the independent ATO review, it will have 21 days to request a review by an independent panel. This panel will consist of two senior ATO officers and one experienced external appointment.

    These review processes will take place before we report a business’s tax debt information to CRBs. We will not report tax debt information while a review process is being conducted.

    What information will be reported to CRBs?

    We will provide registered CRBs with:

    • unique identifiers for the business, such as ABN and legal name, and
    • the balance of the overdue tax debts of the business at the date they are reported.

    Once a business’s tax debt information is reported to CRBs, we will regularly update the overdue tax debt balance. This will continue until the business no longer meets the reporting criteria (in which case it will be removed).

    Who will receive information about tax debts?

    We will only report tax debt information to registered CRBs.

    A CRB is an organisation whose business involves collecting, holding, or using information in order to provide interested parties with information about the credit worthiness of a business. We will only provide tax debt information to registered CRBs who have entered into an agreement with the ATO. The eligibility conditions a CRB must meet before entering into an agreement with us are being finalised.

    We expect CRBs will include the tax debt information in their credit reports which are available for purchase by interested parties (eg financial institutions and the community) who may wish to use this information to make decisions on the credit worthiness of a business.

    A credit worthiness report may include an aggregate view of a business’s overall payment behaviour, a credit score, and specific details of defaults and legal actions. Tax debt information will contribute to this view. The specifics of how this data is used and displayed will be confirmed through the consultation process with the CRBs.

    We will undertake a consultation and design process to develop appropriate protocols and governance arrangements. Participating CRBs will be confirmed when the measure is implemented, and will be published on

    How long will tax debts remain visible on a credit report?

    If a business no longer meets the criteria to be reported to CRBs, we will instruct the CRBs to remove and no longer report (in any future credit reports) the tax debt information of the business. Ordinarily, this will be when the business has paid its tax debt or entered into a payment plan.

    This removal of tax debt information from a credit report differs from the standard approach of the credit reporting industry, where defaulted debts remain visible for a much longer period (generally five years).

    What if a tax debt is incorrectly reported or reported in error?

    We understand that this is a concern for many businesses. We will put in place robust processes to mitigate the risk of information being reported incorrectly.

    Where a business disagrees with the tax debt information reported to a CRB, it should contact us. Where tax debt information is reported in error or incorrectly, we will instruct the CRBs to remove or correct the information promptly.

      Last modified: 19 Dec 2018QC 53638