Why the ATO wants to help your business – yes, really

How viable is your business?

The ATO is conducting a pilot exercise of what it calls an “arm’s length” approach where critical decisions on the viability of businesses with large tax debts are obtained before proceeding with costly and resource intensive recovery action. The pilot is called the ATO’s Independent Viability Assessment program and mirrors a similar program run by United Kingdom’s HM Revenue and Customs where taxpayers with debts of more than £1 million undergo a financial review by external practitioner.

The ATO said the initial pilot demonstrated that an independent viability assessment can be beneficial because:

• taxpayers appreciate the opportunity of an independent, objective and professional review;
• the program adds a layer of professional rigor, thus emphasising the ATO’s commitment to supporting businesses with a viable future;
• in more complex scenarios, the assessment supported the ATO in fully identifying and understanding the true nature of the taxpayer’s situation.

The ATO has extended the pilot with one of the practitioners involved in the initial pilot, and will use a tiered approach where cases will be categorised according to the scope of the review. The aim is for the review to be completed within 7 to 10 days, during which time the ATO says it will hold any legal actions, although current tax obligations must continue to be met.

The extended pilot will focus on the following case criteria:

• business taxpayers with large tax debts over $500,000;
• the business is engaged with the ATO, their information can be made available and they are prepared to submit financial information to the third party practitioner.

The taxpayer will be provided with a copy of the practitioner’s report and then discuss how to proceed in relation to their tax debt with the ATO.

The viability of a business can, of course, be quite a subjective matter, certainly in the eyes of the business itself. While the ATO might form a view that a business is not viable, the business itself might disagree and insist it is viable. The involvement of an independent practitioner in ascertaining the viability of the business might go some way to resolving this issue.

In any event, the assistance being offered by the ATO should be welcomed, and SMEs should make use of the business viability assessment tool. Having good open communications with their accountant, adviser and/or banker would not go astray either.

Terry Hayes is the Editor-in-Chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.