There is strong opposition to Federal Government plans to report tax debts to credit agencies.

The Federal Government has proposed a law that would allow the Australian Taxation Office (ATO) to disclose small business tax debts to credit reporting agencies.

The proposed law would apply to businesses with Australian Business Numbers and tax debts of more than $100,000 that are over 90 days overdue.

Tax debts to the ATO are currently around $24 billion.

The tax ombudsman, small business ombudsman and a number of lobby groups have raised concerns that the legislation is being rushed and does not include proper safeguards to protect taxpayers.

A Senate inquiry into the proposed law has received submissions warning that people's livelihoods could be destroyed by marks on their credit rating.

Adverse credit ratings stop business owners from being able to borrow money and even set up basic services such as a mobile phone account in some cases.

Assistant Treasurer Michael Sukkar says the law targets people who do not effectively engage with the ATO to manage their tax debts.

He claimed it would “reduce the unfair advantage obtained by businesses who do not pay their tax debts”.

Lobby groups including the Law Council of Australia say there are many legitimate reasons for businesses to rack up tax debts.

Opponents what more transparency on exactly how the laws would be applied, and whether there are reasonable safeguards.