Is your accountant helping you with your tax debt?

As the Australian Tax Office (ATO) continues to ramp up efforts to collect overdue tax debt, businesses across the ACT and beyond are certainly feeling the pinch. 

It’s widely known that the amnesty extended during the COVID period has long since ended, however the pressure on businesses to catch up on payments – some of which have been accumulating for years – has reached breaking point for many.

Long overdue tax debts in excess of $100,000 are a particular concern, with the ATO now wasting little time before engaging credit reporting agencies or issuing garnishee notices. The business owners at the receiving end of these communications are understandably rattled, with some acknowledging that to pay these debts would inevitably lead to insolvency.   

Understanding the ATO’s role

The ATO exists to collect taxes on behalf of the government. They have practices and processes that they must follow, and taking action to recover outstanding debts is one of them.

Second Commissioner of the Tax Office, Jeremy Hirschhorn, recently stated that they are “concerned with an increased reliance on unpaid tax and unpaid super to prop up the cash flow of some businesses.” According to Hirschhorn, more than two-thirds of the ATO’s collectable debt is currently owed by small firms.

With this in mind, the ATO’s recent actions are also understandable. Fortunately for most businesses, they are relatively lenient compared to other creditors despite the recent crackdown. Provided that negotiations express a genuine intent to make good on overdue debt, and include realistic payment arrangements, the chances of securing a workable agreement are high. 

The problem for some business owners is that they fear engaging with the ATO so intensely that they ignore the problem for as long as possible. They make and break payment plans, refuse to answer calls, and avoid taking any action until it is too late. 

By the time they reach out to their business advisor or accountant, the options that would have been available to them sooner may have become inaccessible.

Understanding the role of your advisor or accountant

Business advisors and accountants are not just there for the good times in your business journey. More than simply preparing your annual tax return and dealing with tax compliance, they can (and should) play a more holistic role in supporting the sustainability of your business – whether you are cashflow positive or not.

As an expert in your own field, you don’t need to be an expert in financials if you work closely with someone who is. There is never a reason to be too embarrassed to speak with your business advisor or accountant about being in a financial pickle – they are there to offer quality strategic advice to help you through it. 

In situations where you have already received a director penalty notice, garnishee notice, or an indication that credit reporting agencies will soon be involved, you should contact your business advisor or accountant immediately. While the situation may seem hopeless, it’s difficult to know what options are available to you unless you get proper advice. 

If your advisor is unable to help, they may be able to refer you to a team who can – such as RSM’s Restructuring and Recovery division. 

The role we play at RSM

With specialists across business advisory, tax, restructuring and recovery and so much more, RSM is extremely well placed to assist business owners at any stage of the business lifecycle. 

Your accountant or business advisor can work closely with you to understand the full scope of your financial position, and guide you on developing and implementing astute changes designed to position you for greater success. 

Where the situation is dire and has reached the point of possible insolvency, they can connect you directly with the Restructuring and Recovery team who are experts in guiding business owners through all the options available to restructure or wind up their business. You can see a number of case studies here. 

Don’t let the fear of insurmountable tax debt prevent you from seeking quality advice from professionals who want to help. Our goal is to assist you in gaining the clarity you need to make confident decisions about what’s next for you and your business. 

FOR MORE INFORMATION

To speak with an experienced business advisor, or to organise a free business health check, simply contact  your local RSM office.