Managing Your Business’s Tax Debts
Facing a tax bill is a common challenge for many Australian businesses, and the ATO has recently shifted to a more active approach to debt recovery. However, this doesn’t mean they’re out to get you. The ATO’s primary goal is to work with businesses to manage and clear tax debts effectively.
You or your tax agent can review your income tax assessment notices or use the ATO’s online services to check your current tax debt. You can also contact the ATO directly by phoning 13 28 66 (the business enquiries line).
If you find yourself unable to settle your tax debt in full by the due date, don’t panic. The ATO offers several repayment options, including:
- Self-service payment plans: For debts under $100,000, you can set up a plan online. This option is available if you don’t already have an active plan for the same debt and can cover the amount within two years.
- Proposing a payment plan: For larger debts or more complex situations, you can propose a tailored payment plan. The ATO provides tools like the Payment Plan Estimator and Business Viability Assessment Tool to help you create a realistic proposal.
Remember, entering into a payment plan means committing to paying future tax obligations on time.
When proposing a payment plan, it’s essential to accurately assess your capacity to pay. The ATO will require specific information depending on your business structure. This may include income sources, expenses, and cash flow information for the past three months.
It’s important to note that the general interest charge (GIC) applies to unpaid tax debts. This rate is currently 11.38% per annum. The government has also recently 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 successfully is proactive communication. If you’re experiencing difficulties, don’t wait for the ATO to contact you. Reach out to the ATO directly, or to your registered tax agent, as soon as possible. By engaging early and honestly, you can avoid more serious potential consequences like director penalty notices, garnishee notices or having your tax debt disclosed to credit reporting bureaus.
Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.
