Keep Your Business Viable


I attended the NAB National Small Business Summit on Wednesday 27 July (via webcast). Of interest was the presentation by Tax Commissioner Michael D’Ascenzo who on the one hand presented the human face of the ATO and their belief in treating small business as people. On the other, he gave the very clear message that businesses the ATO believe are not viable are going to be weeded out.

With debt ballooning in the economic downturn the ATO is best positioned to make up the shortfall and intend in the coming year to chase the debt of businesses it deems to be not viable. This will be done using a tool developed by the ATO using financial information and its more sophisticated data-matching capabilities rather than the random audit approach. Mr D’Ascenzo said the tool “operates similarly to the models used by banks in making decisions on the provision of finance or credit”. Anyone who’s self-employed – particularly a sole operator – will know how ‘fair’ those  models are! I’ve been declined twice for finance in the last 11 years because a computer told the operator ‘no’ – despite my business being profitable for the last 9 years.

I’m not disputing that it’s important to weed out the businesses who under-report income or those who enter phoenix arrangements from the ‘honest’ businesses. But we all know in this country a small business is most likely to fail within the first 5 years. In those cases of sole operators for example, non-employing businesses (like virtual assistants), it can take a number of years before you turn a profit. The abolition of the entrepreneurs tax offset now makes starting up even harder. Getting clients is very difficult when you operate remotely. Getting clients is difficult when you’re starting out. Mr D’Ascenzo disagreed the ATO is being aggressive but did say it will use the tools to determine businesses “doomed to fail”. Doesn’t sound like too objective an approach to me. He admitted “You will see more businesses exiting”, adding “and that’s probably not a bad thing”.

I guess the message is clear – if you’re a small business, make sure you’re within the ATO bell curve. And for start-ups and sole ops, I guess we can only hope the ATO continues the empathic stance they took during the GFC and gives start-ups not only the benefit of the doubt but a fair go.

©Lyn Prowse-Bishop,

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