SME tax debts escalate

Ian Rogers

Tax commissioner Rob Heferen

That old small business working capital standby of deferring paying business tax obligations is, predictably, becoming more popular.

“In respect to debt, you’ll be aware that in December last year we returned to normal debt collection across all markets. Ensuring taxpayers pay their tax and super obligations is a key focus for us” Rob Heferen, the Commissioner of Taxation, said in a speech to the Council of Small Business Organisations’ Australia National Small Business Summit yesterday.

The amount of collectable debt (which is ultimately tax and super that has gone unpaid by taxpayers) is now at over $50 billion, the tax commissioner said. 

Of this, 65per cent (or $33 billion) of all collectable debt owed “relates to small business and 74 per cent of that relates to activity statements” Heferen said.

“This means a significant portion of the amount going unpaid is GST collected from consumers or PAYG withholding, withheld from employees pay. We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable.

“It’s critical that all employers – big and small – keep on top of their obligations to their employees first and foremost, as well as their obligations to government in respect to GST, income tax, and other taxes.”

The attractiveness of deferring payments on tax debts was one theme left out by RBA assistant governor Brad Jones in his speech at the COSBOA summit.

“As internally generated free cash flow is often in short supply for SMEs, particularly younger firms, access to external financing can make all the difference” Jones said. 

“At the RBA, we’ve consistently heard this message through our liaison program. It also accords with surveys of Australian businesses indicating that a lack of financing is a key barrier to innovation for small firms.

“The highest order problem is that small firms are riskier propositions for suppliers of capital. Survival rates bear this out – whether new or established, small firms are more likely to go out of business in any given year than their larger counterparts. 

“Particularly low survival rates among young small firms are consistent with the ‘up or out’ stage of their development, where they are experimenting and succeeding, or failing and exiting – they either crash through or crash” he said.