Has your business performed a health check lately to make sure that you and your family members or business partners are not unwittingly putting yourselves at risk of personal liability or criminal penalty?
Many SME Directors do not appreciate that they can be made personally liable for:
Directors can also be liable to criminal penalties where they breach the provisions of the Corporations Act 2001 by failing to act with due care and diligence and in good faith, or where they use their position to obtain an advantage for themselves or someone else or cause detriment to the company.
The ATO has become very active in collecting debts from SMEs over recent years. The ATO is actively using:
Did you know that the ATO also has a new weapon in its armoury that has the potential to substantially impact the ongoing operations of a SME business?
In December 2016, the Treasurer, Scott Morrison, announced that from 1 July 2017 the Government will allow the ATO to disclose to credit reporting bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts. This measure will initially only apply to businesses with an ABN and who have a tax debt greater than $10,000 that is at least 90 days overdue.
For a number of years many suppliers who have been left unpaid when their customers enter some form of external administration have complained that had they known that the customer had significant unpaid tax liabilities they would have never extended credit terms for the supply of their goods or services.
Whilst a supplier can run an independent credit check on a potential customer before extending credit terms, there was, prior to the Treasurer’s announcement, no way of determining from those checks the tax debts that may be outstanding.
For SME businesses, the key take away from this announcement is the importance that will be placed on effective engagement with the ATO in relation to unpaid tax debts. If directors put their head in the sand and ignore the warnings from the ATO, directors will run the risk of firmer action being commenced which could result in:
In general, the ATO is often willing to work with SME businesses to agree reasonable terms to repay tax debts in a manner that will permit the business to maintain sufficient cashflow to enable it to continue to trade.
How can we help?
Our team is well regarded by banks and other financiers, and we have an excellent understanding and relationship with the ATO (often a major creditor in SME businesses). We can assist you in reaching agreements with the ATO in managing unpaid tax debts and avoid any negative impact on your business.
We can also undertake an independent assessment of your business to assist you to determine the company’s financial position and identify any risks to the business and potential liability for officers of SME companies.
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Senior Manager, Sydney
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