Recently introduced legislation is poised to take away small businesses’ ability to utilise their tax debt as a tool rather than a burden, says an online lender.

The Treasury Laws Amendment bill includes a measure that will allow the Australian Taxation Office (ATO) to inform credit reporting bureaux when a business has a debt of $100,000 for 90 days or more, as long as the entity has not entered into a payment arrangement with the ATO.

“The ATO has long been viewed anecdotally as the fifth largest SME bank in Australia, with tax debt used pragmatically as a form of affordable working capital,” explained Moula CEO Aris Allegos.

“Many good businesses have managed themselves effectively over the years with ongoing tax debts as the system in Australia has allowed for it.”

In fact, nearly 40% of businesses with a Moula loan are on some form of payment arrangement with the ATO.  

“Moula [believes] that a manageable debt arrangement with the ATO is not a negative reflection on the success or growth potential of Australian businesses,” said Allegos.

However, he noted, “The latest rules implemented by Treasury will serve as a catalyst for businesses to consider shifting their reliance away from the ‘Bank of ATO’ to minimise credit rating risk.”

Following the implementation of the bill, individuals and organisations checking the creditworthiness of a business will be privy to a more comprehensive picture of its outstanding debts.

“Business owners are focused on their day-to-day operations, so brokers can use the changing ATO regulations as an opportunity to move clients into responsible and sustainable refinancing solutions, rather than continuing to treat the ATO as a bank or form of working capital,” said Allegos.

“Brokers play a critical role in helping businesses tap into finance products that best suit their needs.” / “New legislation an opportunity for brokers” / Madison Utley

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