The ATO is Winding Up More Small Businesses Than Ever

According to Chifley Securities, the Australian Taxation Office (ATO) is coming down hard on small business failing to pay their tax debt, noticeably shifting their focus away from large businesses.  A recent report into debt collection by the ATO revealed that a massive 60% of the ATO’s $20 billion debt recovery was taken from small businesses last financial year. The report details a substantial increase in the amount of small business collectable debt since 2010, with a $2 billion increase in the financial year 2013-2014.

As a result of this change in focus, Chifley Securities has observed that even businesses with relatively small outstanding tax debts are being aggressively pursued by the ATO. Records for the last financial year indicate that the ATO appears to have significantly reduced the threshold at which they will take action against small businesses from around $300 000 to sums as low as $30 000. Although the ATO claims that there are no explicit thresholds, Chifley Securities has observed a growing trend of pursuing businesses with significantly smaller debts. As well as taking action over much smaller debts, the ATO is pursuing these debts far more aggressively, providing less flexibility and assistance for businesses who are having trouble repaying their tax debt. This means that any business with outstanding tax debts over $30 000 is in danger of being wound up by the ATO.

This has been demonstrated in this year’s ATO figures which show that over the last year they have more than doubled the number of wind-up applications. Chifley Securities expects this trend to continue and even escalate in the coming financial year. The ATO has confirmed it is taking a “timelier and stronger” approach to pursuing tax debt in small businesses to prevent them from gaining an unfair advantage over those businesses who pay their tax on time.

Furthermore, according to a parliamentary inquiry into tax disputes late last year, small businesses have been disproportionately affected by the issuing of erroneously inflated assessments which they do not have the funds or resources to dispute. While larger businesses are able to dispute these inaccuracies in expensive legal battles, small businesses are often forced to accept assessments they believe to be incorrect.

The result of all these changes is that many small businesses are declaring bankruptcy or being wound-up by the ATO, despite still being financially viable. Businesses in this situation are unable to get a loan from a bank in order to address their taxation debt and are being forced to give up their business, losing years of hard work. While it may seem like having a massive tax debt or receiving a wind up notice means the end of the business, this is not necessarily the case. Chifley Securities provides a lifeline to businesses in this situation, supplying finance to businesses who have tax debts, have gone into receivership or are facing other financial difficulties. At Chifley Securities we give business owners the chance to keep their businesses running by providing loans when they need them the most.

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