Your Business Angels

Who makes you pay tax?

OK the ATO, but this is also a trick question.

The other folks that get you to pay tax are the lenders you would want to use, as opposed to those blood-sucking cutthroats that call themselves FinTechs.

Banks and solid lending institutions that are looking for quality clients seek out and want to know your statement of assets and liabilities, income, credit history, and status with the taxman.

When we talk about big-ticket items such as buying real estate, having a clear ledger with the ATO and a good history with the ATO goes a long way toward getting better loans with a mainstream bank and lending institution.

If you want to buy property, buy a family home or invest, having things sorted with the taxman is just as important as proof of income and a deposit.

Australian banks require business clients to be compliant with the Australian Taxation Office (ATO) for several key reasons:

Creditworthiness and Risk Assessment: Compliance with the ATO indicates that the business is financially stable and responsibly managing its tax obligations. This reduces the bank's risk, as businesses that are not compliant may face financial difficulties or legal issues, making them higher-risk borrowers.

Regulatory Requirements: Banks must adhere to strict regulatory standards and compliance checks. Ensuring their clients comply with tax obligations helps banks meet these regulatory requirements and avoid potential penalties or reputational damage.
Financial Transparency: Tax compliance often reflects a business's overall financial health and transparency. Banks prefer to work with businesses that maintain clear and accurate financial records, as it provides a more reliable basis for lending decisions.
Cash Flow Stability: A business that is up-to-date with its tax payments is less likely to face unexpected cash flow disruptions due to tax liabilities, ensuring they can meet their repayment obligations to the bank.

To verify that a business's accounts are up-to-date with the ATO, banks typically ask for the following documents:
Tax Returns: Copies of recent tax returns submitted to the ATO, usually for the past two to three years.

Notice of Assessment: The ATO’s notice of assessment for the latest tax year, which shows that the tax returns have been processed and any outstanding amounts have been paid or arrangements made for payment.

BAS Statements: Business Activity Statements (BAS) show that goods and services tax (GST) and other tax obligations are being reported and paid on time.

Tax Clearance Certificates: In some cases, a tax clearance certificate from the ATO may be requested, confirming that the business has no outstanding tax debts or has an arrangement to manage any debts.

Payment Plans: If the business has any outstanding tax liabilities, documentation of any payment plans agreed upon with the ATO.

Providing these documents helps the bank verify that the business is compliant with its tax obligations and gives the bank confidence in the financial management and stability of the business.