Companies seeking relief via the ATO’s tax payments deferral scheme may be shooting themselves in the foot according to Interlease Director Gary Wilkie.
Companies seeking relief from tax payable commitments are finding the ATO offer to defer payments extremely useful in easing the financial burdens.
Whilst this is good news from a cash flow perspective, Mr Wilkie warns that banks and financial institutions do not view companies making use of this program in a positive light.
"Companies, and their accountants, need to be aware that banks and finance companies take a very dim view of companies seeking funding that are unable to pay their tax obligations on time," he said.
Companies considering the tax deferral tool need to be fully aware of the financial consequences incurred by doing so.
“Once a company has gone down the path of deferring their tax debt, they are effectively warning their financiers that they are having cash flow difficulties,” Mr Wilkie said.
According to Mr Wilkie, banks, in particular, are more than likely to deny funding to any company that has recorded a tax debt on their balance sheet.
“A non-payment of tax will make it necessary for companies to provide, projections, cash flows and full disclosure of the problem when applying for extra funding for the next three to four years”, he said.
Whilst tax payment deferrals could be seen as a blessing to the company, once it is recorded on the balance sheet, it can remain on the company’s records for years.
“This may be the sole reason why a funding facility is not approved,” said Mr Wilkie.
Interlease strongly advises that companies need to realise that deferring tax liabilities can detrimentally affect their credit rating, which impacts capability to obtain funding in the future.
"Making an arrangement with the ATO should only be considered as a last resort in full knowledge that future funding may be compromised,” said Mr Wilkie.
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