Pay your tax before building your business

7 October 2009

Experts from the finance industry have publicly stated that small businesses that take advantage of Australian Taxation Office (ATO) tax relief measures may find it difficult to borrow money in the next few years.

With many Australian companies taking advantage of the ATO's tax relief measures - including deferral of tax payments and interest-free payment arrangements there is a concern that this will negatively impact the SME sector and hinder growth.  Businesses with an annual turnover of less than $2 million and an activity statement debt can apply for a general interest charge (GIC)-free payment arrangement from now until 30 June 2010.

Banks and finance companies however require a full explanation from the company's accountants into deferral arrangements and this may appear in the company accounts for two to three years. Any financier examining the company's records in this time period is likely to consider the deferral of payments to the ATO as a sign that there are cash-flow issues and that the business is not being managed effectively.

Finance industry experts recommend that businesses that have entered into arrangements with the ATO should, if possible, look to clean these up well before seeking new funding to further develop their business.
For more information about the small business tax break, please, businesses can phone the ATO's Business Tax Break Infoline on 1300 337 921.

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