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SMEs weighed down by ATO repayment plan

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Malavika Santhebennur 6 minute read

Research from Sail Finance has revealed that most finance brokers believe the ATO’s repayment plan for small businesses is unduly harsh.

The majority of finance brokers believe the Australian Taxation Office’s (ATO) repayment plan for money owed by small businesses are putting undue pressure on businesses, according to new research.

The research, conducted by small business lender Sail Finance, found that 75 per cent of brokers believe the ATO’s repayment plan for small to medium enterprises (SME) was either “way too harsh”, or “quite harsh”, and could have “serious long-term effects on small businesses” or at the very least a “negative effect on a small business” cash flow.

The research also found that 62 per cent of Australian brokers agreed most small businesses on an ATO payment plan suffer additional hardship as a result of it, and 12 per cent of brokers agreed all small businesses on an ATO payment plan suffer additional financial hardship as a result of it.


Commenting on the research, head of sales and partnership Dan McCarthy said the requirement for small businesses to comply with the same tax repayment standards as larger businesses can bring extra pressure, particularly for those that employ fewer staff, run tighter margins and need credit to fuel their business in lieu of a cash reserve.

“SMEs form the backbone of the Australian economy and are often very closely interlinked,” Mr McCarthy said.

“One business closure will be a customer and supplier lost to many other businesses. More of an understanding of circumstance should be shown by the ATO and, possibly, a more economic repayment plan on tax debt.”

The research results echoed this sentiment, with 75 per cent of all broker respondents saying that given the challenges small businesses already face, a fairer repayment plan would be “interest-free on tax debt for the first 24 months”.

Brokers believe more can be done to prevent unnecessary additional financial hardship in the small business sector. The ATO has recently allowed simplified record keeping and a reduced company tax rate from 27.5 per cent down to 26 per cent for this financial year, but repayment plans are still set to calculate interest on the outstanding amount daily.


Repayment terms are generally only offered up to two years in length and this plan is still in addition to the usual GST and tax payments continuing to accrue.

“From Sail’s perspective, the broker community also agrees that a business’s ATO information should be included as part of an application for finance, however, it doesn’t always have to be displayed in a negative light,” Mr McCarthy said.

“Lots of SMEs are smart operators who utilise the ATO as an additional overdraft account and there’s nothing wrong with this – ultimately, the insight will allow a responsible lender like Sail Finance to see if they can restructure the ATO debt into a smarter repayment solution.”

[Related: ABA pushes ahead with SME advocacy campaign]

SMEs weighed down by ATO repayment plan
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Malavika Santhebennur

Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.


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