Recent tax changes will affect how businesses manage cash flow, debt and compliance obligations. In addition, tax accountants have new obligations following a tax law amendment.
Increased cost of tax debt
The general interest charge (GIC) and shortfall interest charge (SIC) were made non-deductible from July 1, significantly increasing the cost of tax debt for businesses.
This change comes amid an Australian Taxation Office (ATO) crackdown on outstanding debt, with record numbers of director penalty and garnishee notices being issued. These measures are designed to accelerate collection of over $50 billion of tax debt owed to the ATO, exacerbated by pandemic-era leniency.
This policy will provide further cash flow challenges to struggling businesses, which may navigate to banks and other financial institutions for business loans with deductible interest fees, rather than incurring GIC.
Not all businesses will be able to secure tax-deductible finance and will be seeking help from accountants to manage cash flow, analysis and compliance requirements.
There is also concern that this change will further contribute to high corporate insolvency and restructures, with the increased cost of debt rendering many struggling businesses financially unviable.
Struggling businesses will need to lean on accountants to ensure they do not accrue potentially fatal debt by making unintentional errors or late payments. In instances where debt is unavoidable, businesses will need to consult with accounting professionals to manage cash flow, asset protection and financial analysis.
Tax agent code of conduct
A legislative instrument under the Tax Agent Services Act 2009 was enforced on February 25. The Tax Agent Services (Code of Professional Conduct) Determination 2024 outlines a revised code of conduct for registered tax agents.
It introduced 8 additional Code obligations which apply from July 1 and are consistent with the existing key principles. Further, these obligations reinforce the high professional and ethical standards expected of tax practitioners by the community.
Among these code obligations is a renewed obligation for client recordkeeping, communication, regulatory reporting and administration requirements. These obligations are likely to place further burdens on the administrative capacities of tax agents and will require investment in processes, training and systems to ensure strict compliance.
Optima Partners operates at a high standard, and we are committed to maintaining compliance. Any impact to our administrative capacity or practices will be clearly communicated on a per-client basis.
If you have outstanding tax debt or are concerned about these changes, Contact us today to discuss the best options for your business.
