Small companies, big debt

An attendee to a webinar we hosted recently asked an excellent question: how much ATO debt is represented by SMEs? Arguably, most people who serve SMEs in a finance capacity should know the answer. Suffice to say, if you’re a small business with tax debt you are not alone!

The facts and figures

As at October 2019, the ATO was owed $45.4 billion. Take out insolvency-related and disputed debt… and that number is: $26.6 billion in undisputed, collectible ATO debt. Incidentally, that’s an increase of 33% from 2015; ATO debt just continues to rise.

Drilling down (and in answer to the initial question), $16.5 billion (62%) of that debt is owed by small businesses. That’s a big debt for small companies.

Since those numbers, we’ve experienced two extraordinary events: catastrophic bushfires and a global pandemic. These events have had (and are still having) a huge impact, particularly on small businesses. While we don’t yet know how that translates to tax debt, it’s safe to say that “significant” is likely to be a serious understatement.

Why is it important?

If you’re someone who serves small businesses in a finance-related way, the size of this number matters because it quantifies (1) the scale of challenge a lot of our small business clients are facing, and (2) the size of the opportunity that exists to help those customers. If you’re a small business owner with tax debt then you’re already very aware of the toll it can take – on you personally and your business.

Dealing with (1)… in our role as specialist tax debt advisors, we see and hear the strain of small business owners every single day.

Those with minor levels of tax debt have a constant sense of unease and worry; those with higher debts have sleepless nights, health problems and a feeling of panicked inertia as they wonder whether they’ll lose their businesses or homes.

As financial-related professionals who serve small businesses, we should all understand the deeply stressful nature of tax debt. Basically, if you have clients have tax debt, they’re feeling the strain. Which brings us onto (2)…

The opportunity to help

Business owners in this situation need the calm, reassuring support that comes with expert, specialist tax debt advice and resolution. That’s why we at Tax Assure are here.

But in addition to that, other services are often needed. Many may need finance as part of their tax debt solution (and for their ongoing business management). Some don’t have the right accounting resources in place and need additional support. A lot would benefit from advice on their business planning and management. A few may end up needing help from turnaround specialists, or liquidation or insolvency practitioners. Some require legal assistance to navigate the often complex landscape of debt.

The tax debt itself is our expertise. We do everything possible to help our clients get the best outcome, negotiating direct with the ATO to achieve sustainable repayment plans and refunds of interest and penalties. For other services, we harness our partnership network to access specialists for our clients.

With that $16.5 billion (and growing) SME tax debt mountain there are a lot of people to help, and a lot of ways our partners can be part of that solution. Which is why that number is one we should all know!

If you or your clients have tax debt please reach out to us. We’d love to help.