ATO TO DISCLOSE TAX DEBT INFORMATION TO CREDIT REPORTING BUREAUS

The Federal Government has released draft legislation which will allow the Australian Taxation Office (“ATO”) to disclose business tax debt information to Credit Reporting Bureaus (“CRBs”). Previously, the ATO has not had authorisation to report tax debt information to CRBs under provisions of the confidentiality of taxpayer information. However, implementation of this draft legislation will allow the ATO to disclose tax debt information.

The objective to implementing this new legislation is to encourage more businesses to actively engage with the ATO to manage their tax debts. It is also expected that the legislation will enable better transparency around tax debt, allow credit providers make a more complete assessment of the credit worthiness of a business.

WHICH TAX DEBTS WILL BE REPORTED?

While the specific circumstances and exceptions for disclosure of information are yet to finalised, it is likely that the ATO will be permitted, although not required, to report an entity’s tax debt information to CRBs where the entity satisfies the following reporting criteria:-

- An entity must have an ABN and the entity must not be an excluded entity.

- An entity must have a tax debt, of which at least $10,000 is overdue by more than ninety (90) days.

In situations where entities have a significant tax debt which is overdue by more than ninety (90) days, those entities will be given a specific period of time before the debt will become due. The ATO will also delay reporting those that have recently incurred significant increases in their tax obligations, which should allow an opportunity for entities to respond to sudden increases and make payment of the debt amounts. Should the entity still be unable to make payment, only then will the ATO commence debt recovery. The debt recovery process may vary depending on an entity’s past compliance history.

- An entity is not effectively managing their tax debt with the ATO.

For an entity to be perceived as engaging effectively with the ATO to manage their outstanding tax debts, they must enter into a payment plan with the ATO and adhere to the terms of that payment plan until completed. 

The ATO’s main objective is to make it easier for entities to manage and pay their tax debts. In determining whether an entities tax debt information will be reported, the ATO will consider the individual circumstances of each entity, including their capacity to make payment of the proposed amounts, any steps they have taken, or propose to take, in an attempt to minimise their tax debt. The ATO may also take into consideration an entity’s past history, including any previous defaulted arrangements and late lodgements. 

HOW WILL AN ENTITY BE NOTIFIED THAT THEIR TAX DEBT INFORMATION IS REPORTED?

If an entity satisfies the reporting criteria and the ATO intends on reporting the tax debt information, the entity will be served with a notice. Following this, the entity will then have twenty-one (21) days from the date of the notice to take action to prevent that information from being reported. 

In the twenty-one (21) days after the date of the notice, the following action can be taken to prevent the tax debt information being reported which include; paying the outstanding tax debt; effectively engaging with the ATO to manage the tax debt; or if an entity is experiencing exceptional circumstances, they can make a claim to the ATO. Exceptional circumstances may include family tragedy, serious illness, impacts of a natural disaster and other circumstances.

WHAT HAPPENS NEXT…

In accordance with the current draft legislation, the ATO proposes that once an entity’s tax debt information has been reported to CRBs and this information has been listed on your Credit Report, the ATO will provide regular updates to the CRBs on the balances of an entity’s overdue tax debt, however, the entity itself, will not be notified of these updates. The ATO will continue to provide updates to the CRB until the entity no longer satisfies the reporting criteria. Once a tax debt no longer satisfies the reporting criteria, the debt will ultimately be removed from the entity’s credit report.

5 hot tips to help clear your debt this summer

Summer has finally arrived and not only has your summer wardrobe been collecting dust, but your debts probably have too.

Recent studies show that Australians have been cutting back and minimising their spending and decreasing their debts since the Global Financial Crisis in 2008. However we are still collectively paying interest on around $31.7 billion on credit card debt alone, and between all the different ways that we can now obtain a line of credit, it is very easy to fall into debt before you even realise.

Here are five (5) ways you can freshen up your finances to clear your debts faster and maintain a debt-free life:

1. TAKE RESPONSIBILITY

You have managed to get yourself into debt, and now it is time to take responsibility. Grab a pen and a piece of paper and start to write down the outstanding balance of all your personal debt that you currently owe. Once you have your list, next to each of the outstanding balances write down the interest rates that you are paying on each of your debts.

2. CONSIDER YOUR OPTIONS

You now have a list of all of the interest rates you are paying for each of your debts. You will be surprised how much interest you are paying on some of your loans.
The average interest rate is around 15%-18%, so it is important that you take the time to review your loans and compare them with what else is on the market to make sure you are getting the best interest rate for yourself, and not wasting money and growing your debt by paying too much in interest payments.

3. BE REALISTIC

Debt usually doesn’t appear overnight, and in most cases gradually builds up over time. Likewise, paying debt off usually takes time. It is important to set yourself realistic goals that you can achieve. Making unrealistic goals is counterproductive and will only leave you disappointed. Although, it is also important to reward yourself along the way (without spending more money) for achieving the goals you set for yourself.

4. CONSOLIDATE YOUR DEBTS

Depending on how many loans you have and the amount, you may want to consider whether it may be beneficial to consolidate your debts, preferably with a lower interest rate. The more loans you have the harder it is to keep track of them, and missing payments will only result in you paying more money than needed.

5. STAY OUT OF DEBT

Understand how you managed to get into debt in the first place. No matter whether it comes down to overspending, an unexpected bill, or a drop in your income, you need to take steps to be sure you don’t wind up on the debt merry-go-round again. Living within a budget, building a pool of rainy day savings and sensible money management are the keys to living debt-free.

WHATS YOUR NUMBER?

In Australia, lenders such as banks, credit card companies, utilities and telcos can use your credit rating to assess the risk of lending you money.

A credit rating or “credit score” as many people refer to it, is a number that is calculated using the information on your credit file. It is a simple representation of your suitability to a lender for a line of credit, as it demonstrates a person’s ability to adhere to and meet financial obligations.

Your credit score is important because it directly influences the amount of credit a lender will provide to you as a borrower. It can also affect the interest rate that a lender offers you and any other terms a lender may present to you, when trying to obtain a line of credit. It is imperative that when you are thinking about obtaining finance of any kind that you check your credit file, and your credit score first (Easy Credit Repair can help you do this).

So what credit score should we be aiming for? Credit scores fall into five categories, which are listed below to assist you in establishing which category you fall into:

Excellent: 833 – 1200

Very Good: 726 – 832

Good: 622 – 725

Average: 510 – 62

Below Average: 0 – 509

Accordingly, the higher your credit score the better your credit rating is going to be. If you find yourself with a low credit rating that is below average, or even average, then this can make your options of obtaining credit, difficult and somewhat limited.

Easy Credit is able to assist you with increasing your credit score. For a free credit file analysis on how we can work towards increasing your credit score contact us today!

HOW CAN YOUR ATO DEBT AFFECT YOUR BUSINESS?

 

The Federal Government has recently announced that it will now allow the Australian Taxation Office (“ATO”) the right to disclose tax debt information of businesses to registered Credit Reporting Bureaus (“CRBs”) such as Equifax (previously known as VEDA) and Dun & Bradstreet.

These changes could mean significant impact for businesses, as their ability to secure any type of funding from banks and other lenders will become extremely limited. For those businesses that are able to secure funding, this will usually be at a significantly higher interest rate.

While the specific circumstances and exceptions for disclosure of information are yet to be finalised, it is likely that the ATO will only disclose tax debt information of a business to a CRB if the business satisfies the following criteria:

· The business has an Australian Business Number (ABN), and is not an excluded entity;

· The business has a tax debt of at least $10,000.00 which is overdue by more than ninety (90) days; and

· The business is not effectively engaging with the ATO to manage its tax debt.

The Minister for Revenue and Financial Services Kelly O’Dweyer says “the change will help to support informed decision making in the business community and remove the unfair advantages gained by businesses who do not pay their tax on time”.

The aim of the legislation is to encourage more businesses to actively work with the tax office to manage their debts adequately. Businesses which are effectively engaging with the ATO to manage their tax debts will not have their tax debt reported to CRBs. The definition of effective engagement is yet to be determined, but it is expected that it will include businesses which have established a payment plan with the ATO or are disputing their tax-related liabilities.

The ATO will notify a business if they meet the reporting criteria advising that they have 21 days to respond before their tax debt information is reported to CRBs.

If you think your credit may be affected or you have any concerns regarding the above, Please contact our office today on (07) 3067 8914.

Changes to National Credit Reporting Requirements - How Will This Affect You?

New rules will soon be implemented which will affect individuals applying for credit cards, loans and mortgages.

Credit Rating bureau, Experian, explains that two-thirds of Australians are unaware of the forthcoming changes to national credit reporting requirements that will assist lenders in obtaining more information about a customer’s financial history.

Currently, lenders are only required to disclose a person’s negative data, such as defaults and bankruptcies. This will now change, due to amended privacy laws as part of new comprehensive reporting conditions introduced in 2014, which will allow positive data, such as a person’s repayment history to be shared, with credit reporting bureaus and lenders.

Suzanne Steele, managing director of Experian, explains positive data sharing to be an overwhelmingly positive change for Australian borrowers, as it can give credit providers a complete overview of any potential customer’s financial situation, which will ultimately create better situations for most Australians, regardless of their circumstances. For example, it may assist first home buyers who don’t have a long credit history, to be approved for finance, where previously they might have been declined. It will also enable those Australians with a strong credit history to access more competitive deals and interest rates.

Thus, a survey of 1000 Australians conducted by Experian in March found 71 per cent of Australians had never checked their credit score, saying they either didn’t know how, didn’t know what a credit score was or didn’t care. Ms Steele, ascertains that being aware of what your credit score is and the parts of your finances that influence the score is critical, as it enables you to know where you stand and address any issues before applying for credit.

Credit providers in Australia will soon be looking back at up to 24 months of your credit repayment history, which is why consumers need to start positively impacting their future credit scores now.

If you are unsure where to start and need assistance, contact Easy Credit Repair today and we can work out the easiest way forward for you.

THE UNEXPECTED FACTORS AFFECTING YOUR CREDIT SCORE

Do you have a clean credit file?

You might think that you do, but without getting a credit history check, you won't know for sure. There could be some unexpected factors lingering in your file from years and years ago - factors that you thought may not even count towards your credit score.

What factors do end up on a credit history, and how could they affect your ability to take out a loan in the future?

More than just debt

According to the Office of the Australian Information Commissioner (OAIC), something as simple as your loan repayment history can have a lasting impact on your credit score. It is your repayment history information, that ends up on your credit report, it does not show the amount of money that you did not repay, but rather that you missed a payment. You are deemed to have missed a payment if you have not paid the full amount 14 days after the due date.

Repayment History Information can only be can only be recorded on your credit file if it is related to a line of credit from a licenced provider, however, such as a mortgage repayment, student loan or credit card balance.

Failure to fix a poor credit score could hold you back from buying property because you'll be rejected by mortgage brokers and banks for a home loan.

How is my credit score calculated?

Your credit score is calculated based on information from your credit file, and gives a score between 0 and 1,200. The higher the score the better, and the less likely you are to have to pay elevated interest on a loan.

The average credit score in Australia is 749, but a reasonable score can be as low as 622. If you don't regularly check your credit score, you won't notice when something goes wrong (even if it's a mistake) and your credit score may be low until you get a report and work on repairing it.

Something as simple as enquiring at lots of credit providers for the best deal can severely impact the likelihood that you'll be accepted by another provider.

If you're unsure what your credit score is, or if you keep getting rejected by credit providers, there's probably an underlying reason and Easy Credit Repair can work on repairing this for you.