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The ATO has ramped up the enforcement of its right to garnishee debts in an attempt to reduce growing tax liabilities, debtor finance provider FactorOne has warned SMEs.
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ATO in garnishment clampdown
20 May 2015
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According to FactorOne's general manager, Greg Charlwood, the ATO’s decision to enforce its rights to garnishee debts will impact businesses with as little as $93,000 in debt.
However, Mr Charlwood said there are steps SMEs and their accountants should take to avoid - or best handle - a garnishment situation.
"Many SMEs don't lodge BAS and IAS returns because they don't have enough funds to meet the payment obligation. However, lodging on time is crucial, as it makes any negotiations with the ATO so much easier," Mr Charlwood said.
"So, businesses unable to meet tax commitments must lodge their statements on time and should engage specialised tax experts to interact with the ATO to put in place a repayment program.
"Once a repayment program is established it is highly unlikely that a garnishment will be issued if the repayment program is up to date."
Mr Charlwood said businesses must always look at ways to enhance cash flow and ensure there is a sensible and organised plan in terms of which creditor receives priority payment.
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"Negotiating longer payment terms with suppliers and being more proactive in debtor collections are two basic but effective ways to enhance cash flow and keep the ATO onside," he said.
"Invoice finance, or factoring, is the most effective and efficient way of freeing up cash flow. Given the ATO's current approach it may be timely for those businesses out there struggling to meet commitments to consider factoring."
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