Facing a tax bill is a common challenge for many Australian businesses. Whether you’re currently dealing with a tax debt or anticipating one, it’s crucial to approach the situation proactively. Engaging with your tax agent and the ATO early on is the best way to manage your debt and get your business back on track. The ATO has recently adopted a more active approach to debt recovery, but this doesn’t mean they’re out to get you. The primary goal of the ATO is to work with businesses to manage and resolve tax debts effectively.

Determine How Much You Owe

To get a clear understanding of your tax debt, you or your tax agent can review your income tax assessment notices or use the ATO’s online services. You can also contact the ATO directly by calling 13 28 66 (the business enquiries line) for assistance.

Repayment Options

If you’re unable to settle your tax debt in full by the due date, don’t worry. The ATO offers several repayment options:

• 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 if you can pay it off within two years.
• Proposing a Payment Plan: For larger debts or more complex situations, you can propose a tailored payment plan. The ATO offers tools like the Payment Plan Estimator and Business Viability Assessment Tool to help you create a realistic proposal. Keep in mind, entering into a payment plan means committing to paying future tax obligations on time.

Assess Your Capacity to Pay

When proposing a payment plan, it’s essential to assess your capacity to pay accurately. The ATO will ask for specific information based on your business structure, including details about income sources, expenses, and cash flow for the past three months.

Interest

It’s important to remember that the general interest charge (GIC) applies to unpaid tax debts. The current GIC rate is 11.38% per annum. The government has recently announced plans to make GIC non-tax-deductible, which would increase the effective cost of unpaid tax debts.

Engaging with the ATO

Proactive communication is key to managing your tax debt successfully. If you’re facing difficulties, don’t wait for the ATO to contact you—reach out to them or your registered tax agent as soon as possible. By engaging early and honestly, you can avoid serious consequences like director penalty notices, garnishee notices, or having your tax debt reported to credit bureaus.

Remember, the ATO prioritises superannuation guarantee debts, so it’s essential to stay on top of these obligations.

Help Is Available

While dealing with tax debt can be stressful, the ATO provides tools and support to help you manage your debt and get your business back on track. By seeking professional advice from a registered tax agent, honestly assessing your capacity to pay, and engaging proactively with the ATO, you can navigate this challenge and set your business on a path to financial stability.

Remember, the sooner you act, the more options you’ll have.