Why small businesses must ‘eat the frog’ and face their ATO debts
Ignoring ATO debt is not an option for small businesses; it’s not a matter of if the ATO will take action, but when, says Tax Assure director Olga Koskie.
Australian businesses are grappling with a daunting, yet unavoidable challenge: the ATO wants its money back. As a tax debt negotiation specialist at Tax Assure, I’m deeply concerned about the profound impact of this debt crisis on SMEs and our broader economy.
This surge in ATO debts has escalated dramatically. We’ve seen the average size debt in the clients we help jump from $300,000-$400,000 to now $800,000-$1.2 million. This poses a grave threat to businesses of all sizes and necessitates urgent action.
The key message I want to convey is clear: SMEs must face their financial challenges directly. Or as I like to call it ‘eat the frog’.
What does ‘eat the frog’ mean? It’s about tackling the tasks or issues that you’ve been avoiding. And once you do, you’ll feel better.
Ignoring ATO debt is not an option; it’s not a matter of if the ATO will take action, but when.
By addressing the issue proactively, businesses can access a wider range of solutions and avoid the severe consequences of enforcement action.
If you face it, don’t ignore it, and deal with it, then your tax debt specialist will be able to provide solutions that will get you into payment arrangements and help you sleep at night.
There’s a common misconception that compliance with the ATO requires clearing the debt entirely. That’s not true. Once all lodgements are completed and you are in a payment plan you will be considered in a compliant position and protected from further recovery action, as long as you comply with the payment plan conditions and obligations.
When you seek guidance from tax debt experts you can often unveil alternative solutions, mitigating the need for insolvency and its associated stress.
Unfortunately, we’re also seeing an uptick in what I’d call bad or misguided advice. Many businesses are being told that insolvency is the only way out, but in many cases – with the right funding, advice, debt negotiation, and tax debt advice — there are better solutions, and there are personal ramifications to consider, potentially from liquidation.
It’s crucial for SMEs to understand that they don’t have to navigate these challenges alone. Leveraging the expertise of specialists can alleviate financial strain and provide clarity on the available options. With the right professionals by their side, SMEs can develop proactive debt resolution strategies tailored to their specific circumstances.
The consequences of neglecting ATO debt are severe. Steep interest charges and enforcement actions, such as garnished wages and legal proceedings, can exacerbate financial strain and jeopardise business viability.
The time for action is now. SMEs must acknowledge the urgency of addressing ATO debt and take decisive steps to safeguard their financial future.
By collaborating with specialists and adopting proactive debt resolution strategies, SMEs can navigate these challenges and emerge stronger, ready to tackle the next set of challenges with greater resilience and support.
Olga Koskie is the director at Tax Assure and a former commercial litigation lawyer with 20 years of experience.
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