Thursday, May 30, 2024

A wave of tax debtors

Prior to businesses shutting down when the economy was fairly healthy, 25% of businesses could not find the cash to pay their tax and GST on time.

This new research indicates that the Government might face a wave of ‘tax debtors’ within the Australian business community after its cash stimuli and wage subsidies end in September.

Th results show that 1 in 4 businesses overall, and 21% of SMEs, were unable to pay their GST and tax in cash, in full in 2019.

Among the quarter of businesses overall who were unable to pay their full GST and tax bills in cash every time in FY2019, 64% and 83% of SMEs – mostly paid it through a repayment plan with the ATO or on credit card.

Insufficient cash flow can cripple businesses and cause financial difficulties when it comes to paying tax, particularly among small businesses which have greater credit constraints and do not have access to large cash resources.

“The challenge of managing good cash flow becomes more apparent when BAS and tax time comes,” says spokesperson and licensed financial advisor, Helen Baker.

3 in 4 businesses cited cash flow issues as the major reason they were required to go on payment plans with the ATO or make payments via credit.

“The fact that a significant proportion of businesses don’t have the cash to pay for their ATO bills in full each time suggests that businesses are not setting aside money throughout the year of these payments.”

“If this problem is experienced by a significant proportion of businesses, it could cause a chain reaction of delayed payments throughout the business sector. Business financing may be a suitable option for businesses struggling with cash flow. One option to consider for loans to visit, which can help businesses of all sizes get access to a range of loans to help cover shortfalls, unexpected expenses and pay tax,” concludes Ms Baker.

The findings come from an independent survey commissioned by including 261 business owners – 88% of which are SMEs. The full survey results can be found here.

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