According to a new article by Philip King in Accountants Daily, tax debts of SMEs have doubled compared to before the pandemic and liabilities of $1 million are now common.
This is a stark reminder that many small suppliers are still struggling post-pandemic, as revealed in a recent PASA article about surging insolvencies amongst SMEs.
Speaking on the latest Accountants Daily podcast, Olga Koskie, Director and Principal of Tax Assure, revealed the firm was seeing many more clients as the tax office took a tougher line over billions in collectable debt.
“We have hospitality, we have labour hire, we have construction, we have building – every industry, and more and more industries, and more and more businesses, especially post COVID, have got larger tax debt than we’ve seen before,” she said.
“The level of debt that we’re seeing I would say has doubled. Pre-Covid around $300,000 would have been an average debt. Now I would say an average debt would be closer to between $600,000 and $800,000. And we’re seeing a lot more debt over $1 million on a very regular basis.”
Ms. Koskie confirmed that Tax Assure had dealt with debts from $30,000 up to $19 million, with referrals coming from accountants, brokers, financial advisers, business advisers and insolvency practitioners.
“When you’re late paying your tax, the ATO charge you interest. At the moment, it sits at about 10.5 per cent compounded daily. So that interest can be huge – sometimes it’s over half the debt,” she said.
This concerning trend begs an important question for all procurement leaders: do your critical small suppliers need more help than you might be aware of? Are they facing large latent tax debts that might threaten your supply?