ATO grants payment relief as fuel crisis drives record business slump

The Australian Taxation Office launched temporary repayment plans for businesses struggling with surging fuel costs on Wednesday, as industrial conditions recorded the steepest monthly decline since early 2020.

The tax office announced its fuel response payment plan, allowing eligible taxpayers to lock in three-year payment commitments with equal monthly instalments and no upfront payment.

"We recognise the fuel situation may severely affect some businesses, disrupting business supplies and day-to-day operations and creating uncertainty and financial pressures," ATO Commissioner Rob Heferen said.

The announcement came as data released by the Australian Industry Group showed industrial conditions had the biggest monthly fall on record in March. The Australian Industry Index fell 19.9 points to -23.6.

30% report fuel volatility

Businesses reported uncertainty, rising input costs, and supply chain and demand disruptions as the main issues.

30% of businesses reported volatility in fuel prices, freight, or supply arrangements. More than a quarter (26%) said rising costs were a major pressure in fuel, freight, raw materials, resins, plastics and packaging.

Almost one in ten businesses (9%) cited workforce pressures, including the impact of high fuel prices on staff and travel costs keeping people away from the workplace.

"Our monthly real-time collection of data on industry activity and sentiment makes it clear that the impacts of the fuel crisis are already being felt across the economy," Innes Willox said. Willox is Chief Executive of Australian Industry Group.

Four eligibility criteria

Eligible business taxpayers must meet four criteria.

They must demonstrate increased business operating costs, either directly through increased fuel prices or indirectly through growing logistics and supply chain costs.

They must have a new or existing tax debt they cannot service. They must demonstrate they could have feasibly paid those obligations if fuel prices had not risen. They must ensure their lodgments are up to date within three months of the payment plan's commencement.

The ATO will decide whether to remit the General Interest Charge attached to late payments if the business taxpayer pays monthly instalments on time and brings other outstanding lodgments up to date.

Businesses and sole traders can apply for the fuel response payment plan until June 30. Applications can be made directly through the ATO's online services for business or through a tax agent.

Compliance actions limited

Treasurer Jim Chalmers, Small Business Minister Anne Aly, and Assistant Treasurer Daniel Mulino confirmed some ATO compliance actions will be limited across the worst affected industries. Some debt collection actions may be paused where appropriate.

"What we're announcing today will make our systems more flexible, our supply chains more responsive, and also businesses more supportive as well," Chalmers told reporters in Canberra.

The government will extend the small business responsible lending obligation to help businesses get faster access to credit.

"What this particular measure is all about, (is) ensuring that there is no additional regulatory burden or further delays when they need to access credit to keep their doors open," Aly said.

Banks ready to help

Business Council chief executive Bran Black said individual businesses had already taken action to support smaller firms through the crisis. Larger firms are paying suppliers more frequently and ensuring fuel costs are reflected in payments to suppliers.

"This really is one of those points where we need a genuine Team Australia response. It's not empty rhetoric," Black said.

Black urged small businesses to reach out to larger firms they were dealing with to ask for support if they were struggling.

Australian Banking Association chief executive Simon Birmingham said lenders were standing ready to help.

"Australia's banks recognise the unique responsibility they have to step up in times of crisis," Birmingham said. The former Liberal frontbencher was appointed to lead the banking association last year.

Heferen said the ATO cannot waive debts.

"If high fuel costs are affecting your business' ability to meet tax payment obligations, and you are having difficulty getting working capital financing from your bank or normal source of credit, please let us know, so we can support you through this period," he said.

Construction reported a sharp decline in new orders owing to increased uncertainty and anticipated cost pressures from fuel and materials.

Willox said the fuel crisis will have long-term business implications that will flow through to the broader economy.

"We are, unfortunately, only at the start of seeing its impacts," he said.