Credit Matters Blog

The Taxation Office IS The Government's Debt Collector!

Kim Radok 11 September 2011


The statement, the ATO is the  debt collector of the federal government, has always been true in the past. It is evident, this statement is still true today, and will also be true tomorrow.

However, the ATO, particularly in this current economic climate, has even more influential impact on our customers' cashflow then previously. This influence is   not just on our customers' cashflow by the way, but on the cashflow of all businesses.


There are several reasons why the ATO is particularly influential on business cashflow decision making currently, and include:

(i) the changing rules of  business, where directors are now  held personally accountable for certain business responsibilities such as company tax, GST, payroll tax etc.;

(ii) the current need of the federal government to pay its bills in a period of falling revenue collection;

(iii) the ever expanding role of the federal government in regulating business behaviour; and

(iv) greater community expectations that the federal government will provide an ever expanding list of benefits.

All these factors indicate the government has a great need of money in a time of reducing revenue and whilst their costs are increasing. How better to obtain this money, then through an increased focus on tax collection.

It would also be wise to understand, the ATO has two huge advantages over other business creditors when it demands cash payments.

The first advantage is an almost open ended litigation budget for the pursuit of business people who have defaulted on their responsibilities. Most business organisations are reluctant to engage in litigation in the first place, let alone, have an open ended litigation budget.

The second advantage for the ATO, are the  special  powers to recover any tax liabilities. These powers include the right to agressively seek reimbursement from delinquent directors and the business via threats of:

(i) liquidation and bankruptcy;

(ii) garnishee orders;

(ii) legal action, which may also lead to jail, etc.

Ultimately, the ATO is able to make the directors and other business decision makers, personally liable for the business debts owed to the ATO, if the business defaults.

These special advantages, are often leass available to other creditors at the same price, thereby giving the ATO with a greater influence over the business community's cashflow decisions.

Therefore, when granting B2B credit, please remember; the ATO is probably going to have the dominiate influence on the destination of  your customer's money, especially when cashflow is tight.

May you be paid today rather then tomorrow.

Kim Radok

NOTE: Another business leson - dealing with slow paying debtor customers, can be observered in the current actions of ATO. I will explore this in my next Blog.