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. This is because, before the nationwide shutdown – when the economy was fairly healthy – 25 per cent of businesses could not find the cash to pay their tax and GST on time.

The findings come from an independent survey commissioned by Money.com.au, an online financial information platform for businesses and consumers, of 261 business owners – 88 per cent of which are SMEs. The full survey results, including breakdowns across organisation size and location, can be found here: money.com.au/business-tax-payment-study

The results reveal that 1 in 4 (25 per cent) businesses overall – and 21 per cent of SMEs – were unable to pay their GST and tax in cash, in full, in 2019. With the country in its first recession in 29 years and small businesses likely to be hit the hardest, will the business sector meet its tax obligations if longstanding cash flow issues were already causing strife?

Among the quarter of businesses overall who were unable to pay their full GST and tax bills in cash every time in FY2019, 64 per cent – and 83 per cent of SMEs – mostly paid it through a repayment plan with the ATO or on credit card. Sixty-five (65) per cent went on a payment plan or paid via credit card at least twice in 2019, and 16 per cent did so every time.

The survey also reveals that 27 per cent of businesses overall and 10 per cent of micro businesses secured financing at least once in order to pay their GST and taxes in FY2019. 

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. 

Three in four (77 per cent) 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. Specifically, cash flow issues due to long-outstanding customer or client payments, according to 43 per cent of businesses overall and 29 per cent of SMEs. A further 21 per cent said insufficient cash flow arose because the business spent beyond its means.

Money.com.au, 15^th July 2020