Dealing with a tax bill is a common challenge for many Australian businesses, and the ATO has recently taken a more proactive approach to recovering debts. However, this does not mean they are out to penalize you. The ATO’s main aim is to work with businesses to effectively manage and resolve their tax debts.
You or your tax agent can check your current tax debt by reviewing your income tax assessment notices or using the ATO’s online services. You can also contact the ATO directly by calling 13 28 66 (the business enquiries line).
If you are unable to pay your tax debt in full by the due date, don’t worry. The ATO offers several repayment options, including:
• Self-service payment plans: For debts under $100,000, you can set up a payment plan online, provided you don’t already have an active plan for the same debt, and you can pay the amount within two years.
• Proposing a payment plan: For larger debts or more complex situations, you can propose a customized payment plan. The ATO offers tools such as the Payment Plan Estimator and the Business Viability Assessment Tool to help you create a feasible proposal.
Keep in mind that entering a payment plan also requires you to commit to paying future tax obligations on time.
When proposing a payment plan, it’s crucial to assess your ability to pay accurately. Depending on your business structure, the ATO will need detailed information, including income sources, expenses, and cash flow for the last three months.
It’s important to note that the general interest charge (GIC) applies to unpaid tax debts, which is currently 11.38% per annum. Additionally, the government has announced plans to make GIC non-tax-deductible, which would increase the effective cost of unpaid tax debts.
The key to managing your tax debt is proactive communication. If you’re facing difficulties, don’t wait for the ATO to reach out. Contact them directly, or consult with your registered tax agent, as soon as possible.
Engaging early and openly can help you avoid more severe consequences, such as director penalty notices, garnishee notices, or having your tax debt reported to credit bureaus.