Does tax debt show on your credit report?

When tax debt reaches a credit file

The ATO is not a normal creditor. It does not send repayment history to Equifax, Experian or illion, and it does not lodge defaults the way a bank or utility does. The one route from tax debt to a credit file is the disclosure of business tax debts scheme, and every one of these conditions has to be met:

• The taxpayer has an ABN and is not an excluded entity (charities, complying super funds, government bodies and deductible gift recipients are excluded).
• At least $100,000 of tax debt is more than 90 days overdue.
• The taxpayer is not effectively engaging with the ATO to manage it, for example through a payment plan that is being kept.
• There is no active complaint with the Tax Ombudsman about the debt.
• The ATO has sent a notice of intent to disclose and 28 days have passed.

If you owe less than $100,000, or you are on a plan you are keeping, you will not be reported, whatever kind of business you run. A referral to the ATO's external debt collector is not a credit event either.

Where it shows up when it does

The ATO sends the information to registered credit reporting bureaus, including CreditorWatch, Equifax, Experian and others, on a weekly basis. It appears on the business's commercial credit file, often labelled as a tax default, where suppliers, lenders and trade credit insurers who subscribe to those bureaus can see it.

For a company, the entry is against the company, not the director personally. For a sole trader, the business and the individual are the same legal person, so the entry is closer to home. Unlike an ordinary default, the ATO's entry is removed once you no longer meet the criteria: see how long an ATO default stays on a credit file.

Indirect ways lenders find out

Not being on your credit file does not make the debt invisible. Three things can still surface it:

• Court action. If the ATO sues and obtains a judgment, the judgment is a public court record and credit bureaus do collect those. That applies to individuals as well as businesses.
• Bankruptcy or liquidation. Both are recorded publicly and are visible to lenders.
• Loan applications. Lenders ask for notices of assessment and ATO account statements. A tax debt on a home loan application is assessed as a liability even though it is not on your credit report.

The practical point is that ignoring the debt is what turns a private problem into a visible one. A payment plan keeps it off your file and gives you something to show a lender.

What to do next

1. Work out whether the debt is a business debt of $100,000 or more that is over 90 days late. If not, it cannot be reported.
2. If it is, check whether you have received a notice of intent to disclose and note the 28 day date.
3. Get a payment plan or other engagement in place so the ATO records you as managing the debt.

More questions: 12 Debt collectors and credit reporting questions answered · Full guide: ATO debt collectors