Tight Tax Net Forces Loans Up

MORTGAGE brokers are writing more business loans relative to home loans, suggesting that pressure from creditors - including the Australian Tax Office - is forcing more small businesses to refinance so they can pay debt.

In a survey conducted by the Australian Finance Group for The Age, 28 per cent of brokers said the proportion of business loans they were writing had increased relative to the number of home loans.

And the ATO's annual report, released last week, said the regulator had collected $52.71 billion in the year to June 30 from taxpayers with payment arrears - compared with $40.41 billion the previous year. The ATO collected a total of $67.5 billion in debt in the latest year, up 27 per cent from the year before.

Indicating that the ATO was now taking a tough line on debt, the report said the regulator had begun prosecutions against 30,000 taxpayers "who ignored us or defaulted on their agreement".

And this year's report sounded a warning: "We will take firmer action against others throughout 2005-06."

Bluestone Mortgages chief executive Alistair Jeffery said the extra lending to businesses was associated with angst over increased scrutiny by the ATO.

He said businesses had become accustomed to low interest rates charged by the ATOon payments in arrears. But with the regulator increasingly willing to take legal steps to collect debt, he warned that the net was closing.

The ATO charges a general interest rate in addition to any penalties that may be levied against people who default on their tax debt. Since January 2000 that rate has averaged 12.5 per cent.

Mr Jeffery said such a low rate served as a disincentive to pay, but if businesses deferred payment so they could hang on to short-term, low-interest capital and this led to the ATO taking legal action, the repercussions were severe.

Dun