Since the COVID pandemic in late 2019, the ATO has been very patient in pursuing SME’s on overdue tax debt. It’s been a lever that’s been pulled to give many struggling businesses the time needed to navigate a very tricky few years.
A lot of businesses owners I’ve spoken to over the last 24 months have taken advantage of the approach and have used the ATO as their bank. As cashflows have tightened, they’ve withheld paying their taxes and used the funds to pay suppliers and wages. The ATO is now owed a staggering $50 billion in collectable debt by SME’s.
It could be argued that it’s led to an unfair playing field. Most business owners, despite the challenging conditions, have been doing the right thing, and stayed on top of their obligations. The ATO has been actively pursuing ATO debts for larger organisations for the last 6 months. It’s been a significant contributor to the large spike in insolvencies over that period.
The ATO has now indicated that they are going to start collecting debt across every payment group in the tax system. SME’s are now no longer going to be able to hide.
Part of levelling the playing field involves involves winding up businesses that don’t have the appropriate cashflows to operate. Which will lead to an increase in insolvencies and an increase to bad debts for suppliers. It’s important that all businesses that give SME customers credit accounts arm themselves with the appropriate tools to protect their own businesses against bad debts.
The trade credit insurance market is still supporting businesses with strong coverage across all sectors. Debtor Protect is a specialist broker that aims to deliver policies that are competitive and comprehensive in their level of cover. Contact us today, to discuss how we can help your business protect its own cashflow.