Never before has the taxation department been in a position to place default listings on individual’s credit files, but this has all changed. Up until 30 June 2017, the Australian Taxation Office has only been able to take people to court in an effort to get them to pay their tax debt; and this has only been possible when debts get to around $345,000. The result of a successful court case would be a court judgment listed on an individual’s credit file (mainly due to commercial activity).
Collectable tax debt has hit record levels; $20 billion, as has the amount of tax debt that the government will not pursue; $1.7 billion. This has led to a decision by the tax department to list small business tax debt with credit reporting agencies like Dun & Bradstreet and Equifax (previously known as Veda) from 1 July 2017. Australian Business Number holders who have greater than $10,000 owing to the tax department for more than 90 days will be the most at risk.
This will not only impact business’, it will also impact individuals as there are so many Australian’s who hold ABN’s. Credit files are divided into Individual and Business Credit Files specifically for P/L corporations. Within an individual’s credit file there is a consumer and a commercial credit section. In addition, individuals are linked to business credit files when that individual is a director of the organisation. So, while the ATO are saying it will only impact ABN holders under the above circumstances, we do not imagine this will be the case.
There has been a lot of change in the credit reporting segment in the last couple of years. We have seen legislation pass that has meant that it’s possible for credit companies to share more detailed information regarding an accounts status and its repayment history. Much of this information has not yet appeared on credit files because of the challenge and expense of collecting this data and sharing it with the credit reporting agencies. What is different about this situation is that the ATO have streamlined process’ in place which mean that as soon as this is operational, it will start to impact people’s ability to obtain finance.
More than ever it is important for you have Repair My Credit Now do a check of your credit files for you. Especially before you put in an application for finance, to ensure the accuracy of your files. Even more people are at risk of having adverse listings on their credit file which will negatively impact their ability to obtain finance. 65% of tax payers are small business owners, and only 72.3% of their tax debts are paid on time. We’re also talking about the ATO. This is a whole new ball game.