No more Mr Nice Guy: the ATO wants its money
Tax time is just around the corner and the ATO has sent out a warning to businesses around the country that owe it money: the COVID-19 moratorium on debt collection has come to an end. Rest assured though, you’ve got some options.
During the early days of the pandemic, the ATO says it deliberately shifted its focus away from firmer debt collection action to help businesses that were experiencing challenges.
However, the ATO has been busy in recent months sending out almost 30,000 awareness letters for business tax debts and 52,319 awareness letters about the use of Director Penalty Notices.
“We’ve seen an encouraging response. More than 20,000 taxpayers have already responded to our awareness letters by making payments or entering into payment plans,” says ATO Deputy Commissioner Vivek Chaudhary.
What happens if you get a letter and don’t respond?
In a nutshell: nothing good.
The ATO has already issued nearly 300 intent to disclose notices and has commenced disclosing some debts to credit reporting bureaus Equifax and Creditor Watch.
The ATO is also currently issuing 30 to 40 Director Penalty Notices each day and expects that daily number to increase.
If you get one of these notices, you’re in hot water and need to act quickly.
Worst case scenario, if you don’t immediately pay back the debt, the ATO could sue you in court, which could lead to your business going into liquidation or voluntary administration.
And if you have a business loan that’s secured against your family house, that could be at risk, too.
So what are your options?
First and foremost, if you receive any correspondence from the ATO about a tax debt you should contact your registered tax professional straight away, or call the ATO to engage in a payment plan.
Mr Chaudhary says the ATO’s preferred approach is always to work with taxpayers to resolve their situation through engagement rather than enforcement.
“We understand that a lot of people – especially small businesses – have done it tough through COVID and may now have a tax debt,” says Mr Chaudhary.
“But don’t stick your head in the sand. Even if you can’t pay the full amount owed straight away, please contact us or your registered tax professional to discuss and we will work with you to set up an appropriate payment arrangement.”
That said, not everyone enjoys the ATO hovering over their shoulder waiting for them to pay off a large tax debt.
If you’re one of those people, feel free to get in touch with us to explore some of your other options with business loan lenders.
The SME lending space is growing each month, with a surge of new lenders and products recently hitting the market – some of which offer flexible repayment options.
Want to learn more? Talk to our brokers today!
Business Loans: A FAQ for Start-ups and Small Businesses
How to get a business loan?
Do your research: Before you apply for any loan, it's important to do your research and compare interest rates and terms from different lenders. You can use online resources like RateCity or Finder to compare lenders and find the best deal.
Have a strong credit score: Lenders will look at your credit score when they consider your application for a business loan. A good credit score will show that you are a reliable borrower and that you are likely to repay the loan.
Be prepared to provide financial documentation: Lenders will want to see financial documentation when you apply for a business loan. This will help them to assess your ability to repay the loan. Be prepared to provide things like your business tax returns, profit and loss statements, and bank statements.
Have a clear plan for how you will use the loan: Lenders want to know that you have a clear plan for how you will use the loan. They want to make sure that you are not just using it to cover personal expenses. Be prepared to explain how the loan will help you to grow your business.
Consider working with a finance broker: A finance broker can help you find the right business loan for your needs and negotiate with lenders on your behalf. This can save you time and hassle and help you get the best possible interest rate and terms.
How do business loans work?
Business loans are a type of loan that is specifically designed for businesses. They can be used to finance a variety of business expenses, such as purchasing equipment, expanding operations, or covering working capital needs.
Business loans typically have higher interest rates than personal loans, but they may offer longer repayment terms. The terms of a business loan will vary depending on the lender and the borrower's creditworthiness.
How to apply for a business loan?
To apply for a business loan, you will need to provide the lender with certain information, such as your business's financial statements, your personal credit report, and your business plan. You may also need to provide collateral, such as a business asset or personal property.
The lender will then review your application and decide whether to approve your loan. If your loan is approved, you will be required to sign a promissory note, which is a legal document that outlines the terms of your loan.
Can I get a business loan?
Whether or not you can get a business loan will depend on a number of factors, including your business's financial health, your personal credit score, and the lender's requirements.
If you are unsure whether or not you qualify for a business loan, you can speak to our finance brokers. We will be able to assess your situation and give you an idea of your chances of approval.
How much deposit do I need for a business loan?
The amount of deposit you need for a business loan will vary depending on the lender and the type of loan you are applying for. Some lenders may require no deposit, while others may require a deposit of 20% or more.
If you are able to make a larger deposit, you may be able to get a lower interest rate on your loan.
How much credit do I need for a business loan?
The minimum credit score required for a business loan in Australia will vary depending on the lender and the type of loan you are applying for. However, most lenders will require a credit score of at least 600 for a standard business loan. If you have a credit score below 600, you may still be able to get a business loan, but you may have to pay a higher interest rate or provide collateral.
What do you need for a business loan in Australia?
The requirements for a business loan in Australia will vary depending on the lender and the type of loan you are applying for. However, there are some general requirements that you will need to meet in order to be approved for a business loan.
A business plan: A business plan is a document that outlines your business goals, strategies, and financial projections. Lenders will want to see a business plan in order to assess your business's viability and potential for success.
Financial statements: Lenders will want to see your business's financial statements, such as your income statement, balance sheet, and cash flow statement. These statements will help lenders to assess your business's financial health and track record.
Personal credit report: Lenders will also want to see your personal credit report. This report will show your credit history and any outstanding debts.
Collateral: Lenders may require you to provide collateral for your loan. Collateral is an asset that you can pledge to the lender in case you default on your loan.
Good credit score: A good credit score will help you to get approved for a business loan and to get a lower interest rate.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.