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ATO collecting debts again: Here’s what that means for Aussie businesses

Person paying bills at computer
Businesses are looking for ways to improve cash flow. (Source: Getty)

With the Australian Taxation Office resuming tax debt collections early last year and supply chain issues continuing to bite, many businesses have been looking for ways to improve their cash flow.

That’s why far more companies are turning to invoice financing, Optipay chief executive officer Angus Sedgwick told Yahoo Finance.

This is a type of business financing that allows businesses to borrow money from a lender while they wait for their customers to pay invoices.


He said his invoice-financing business had seen a two-fold increase in enquiries compared to last year.

“It’s about accessing tomorrow’s cash today,” he said, explaining that companies often needed cash to pay their staff and other bills while waiting on outstanding invoices.

Sedgwick said his business had seen a spike in interest since the ATO started contacting businesses to restart their overdue tax obligations.

In 2020, the ATO relaxed debt collection to support businesses through the pandemic, with the amount of money owing to the tax office ballooning to over $40 billion.

In February 2021, the tax office resumed its debt-collection activities. In tandem with supply chain issues, Sedgwick said cash was tight for small and medium businesses.

“During the height of the pandemic, the ATO wasn’t collecting debt so for businesses who weren’t paying their Business Activity Statements (BAS) or pay as you go (PAYG) each quarter, that was giving them a fair amount of extra cash flow,” Sedgwick said.

“Now that the ATO has come knocking – businesses are looking for ways to improve their cash flow in order to meet their statutory debt obligations to the ATO.”

Why invoice financing isn’t common in Australia

Sedgwick said most Australian businesses were missing out on the benefits of invoice financing.

He said it was commonly used in the US, UK and Europe, but fewer than 5,000 small and medium businesses in Australia had jumped on the financing option.

That was partly because the industry hadn’t done a very good job of educating Australian businesses about the service, Sedgwick explained.

By using the service, businesses can typically access up to 90 per cent of their sales revenue within 24 hours of issuing the invoice.

“Unlike more traditional business loans, there are no ongoing repayments back to the financier as they are repaid when the debtor makes payment of the invoice/s,” he said.

The financier charges the company requesting the loan around 1-3 per cent of the invoice value.

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