Over the Christmas break PM Malcolm Turnbull and Treasurer Scott Morison proposed a plan that could bankrupt or put out of business thousands of small enterprises. Small businesses with a turnover of less than $2 million owe the ATO a massive $13 billion in overdue taxes, and the government is ready to collect.
The proposed plan will allow the ATO to disclose to credit reporting bureaus the names of those who owe money to the ATO. Fortunately, the ATO has assured that those who enter into a payment arrangement with the ATO, to manage their debts, will not be named. Unfortunately for those whose names are on that list, bank and supplier credit could be withdrawn, forcing almost all of these businesses to fold.
Going forward, this plan if correctly implemented, may have its benefits. The theory behind this plan is that when small businesses go through a rough patch they will stop paying their taxes and superannuation, and before long could be snowed under in late fees. This naming measure will make small businesses think twice about going down this path and instead make them change their business model or raise capital. The government hopes that in the long run this will make the small business sector much more healthy.
Whilst good in theory this plan has some serious flaws. It is believed a large chunk of the $19 billion overdue tax is not actually owed. For large enterprises with the money to spend on lawyers, rebuking these claims in court is easy, but for those small businesses that were ‘named and shamed’ the legal expenses would be enough to send them bankrupt.
While this is still a plan in the making we will be sure to keep you up-to-date with the latest surrounding these changes. In order to learn more, and we recommend you do, read business columnist, Robert Gottliebsen’s, article here.