How will an ATO Debt Impact your Business Growth?


Year in, year out, we see small business owners worry about this year’s Tax payment. Many businesses are funding BAS payments and Tax payments simultaneously in February each year. Some are still on payment arrangements from previous tax years. Others are starting to think about funding the payment with an overdraft or a credit card.

Advice from the ATO suggests that a business should always lodge their Tax and BAS returns when they fall due, even if the company is unable to pay it. They say this helps them know that a business understands its obligations. We understand that it can be a scary thing lodging an official return when you know there is a gap in your ability to fund it.

We often see well-meaning accountants and advisers suggesting to clients that they get on the phone to the ATO and arrange a payment plan for the next 12 months. Some cheeky business owners even consider this deferral of their tax payment as a cheap form of operating finance.

This Reserve Bank of Australia report suggested that in the 2017 financial year, the ATO negotiated 650,000 tax payment plans for small businesses. This same report suggested that in June 2017, the ATO was owed $14 Billion relating to tax debt for small business.

The advantages of an ATO payment plan are:

  • It smooths tax payments into easier to manage smaller parcels

  • It frees up cash to fund operations and growth (possibly giving you an unfair competitive advantage).

However, what is usually not considered by the business owner or adviser at the time of negotiating a payment plan is the negative impact an ATO tax debt could have on a credit rating. This can make it nearly impossible to borrow funds from the big banks when the time comes to make the most of your next big business opportunity.

The disadvantages of entering into an ATO tax debt arrangement are:

  • Depending on your business structure, directors can become personally liable

  • The interest relating to the debt is not always competitive

  • There are implications on your business credit rating

  • It can impact pricing on existing loans at review time

  • Banks are unlikely to approve business lending for growth to a business with an ATO debt

  • There can be an even more serious impact, such as the ATO ordering those businesses that hold funds on your behalf to garnish your accounts or even seeking to wind up your business if the debt goes unpaid. 

There is an Alternative to ATO Tax Debt Arrangements

If you are a business that provides good and services to other businesses, then you may be eligible for invoice finance. Also known as invoice factoring, this is a type of accounts receivable financing. Effectively, you get your invoices paid early for an agreed fee.

At Invoice Money we offer single invoice, selective invoice or whole turnover invoice factoring services. Once approved, we provide your business with up to 90% of the value of your outstanding invoices. This is often agreed and paid in as little as 72 hours.

This means a fast, no fuss solution for your Tax debt. In just 72 hours, you could take the funds advanced to you by Invoice Money and pay your tax bill, or last year’s Tax debt. You’ll have peace of mind, as you have cleared the payment and know you are in the hands of a highly trusted, reputable provider of invoice finance. You’ll wonder why you hadn’t done this sooner.

Under an invoice finance agreement, your customer pays us the outstanding invoices when they fall due and we return the balance to you minus our agreed fee.

Invoice finance is an efficient and effective solution to a lumpy end of year tax payment. It removes the need for a lengthy payment arrangement with the ATO and offers you the chance to maintain your credit rating, so your options are wide open when you need funding for your next big opportunity.

At Invoice Money we are proud to offer debtor finance solutions to Australian small businesses. We offer a fast, straight forward solution to help meet payment obligations.

To find out whether invoice finance can help fund your next Tax payment, reach out to our team to discuss your requirements. You can our friendly team on 1300 811 484.

 Invoice Money is the Invoice Finance provider of choice for SMEs. You can contact our team in Melbourne or Sydney here.

Carlyn CordiComment