Managing your business’s tax debts

Facing a tax bill is a common challenge for many Australian businesses. Whether you're currently facing a tax debt or anticipating one in the near future, it’s important to remember that proactively engaging with your tax agent and the ATO is the best approach for getting your business back in the black.

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.

Determine how much you owe

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).

Repayment options

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.

Assess your capacity to pay

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.

Interest

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.

Engaging with the ATO

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.
Remember, the ATO prioritises superannuation guarantee debts, so pay extra attention to these obligations.

Help is available

While facing a tax debt can be stressful, it's important to remember that the ATO offers tools and support to assist you in managing your debt and getting your business back on track.

By seeking professional advice from a registered tax agent to understand your options, 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.