Unfortunately, many of us have tax bills and sometimes we simply cannot pay the Australian Taxation Office by the due date. Whether it be an unexpected tax assessment or unforeseen cash flow problems, there are options available.
The first and best advice I can give you is – firmly implant in your mind that in one way or another, you are going to pay this tax debt.
So, what options do you have?
Option 1 – Borrow money from the bank to pay the amount owing to the ATO
- This clears your ATO debt but creates another debt with the bank.
- In many cases this might be considered to be ‘robbing Peter to Pay Paul’
- If the bank charges a lower interest rate than the ATO (which is likely) and offers a longer repayment period, your cash flow may cope better and make the debt repayment more achievable.
Option 2 – Negotiate with the ATO and enter into a reasonable payment plan
- Firstly, you should identify why and how you managed to be in this position of owing tax.
- I won’t go into all the reasons why people owe tax, but what I will say, if you have been reckless, selfish, deceitful or intentionally created a tax debt the ATO will be less inclined to negotiate a payment plan.
- If there are legitimate reasons that you are unable to pay your tax debt and you have a history of meeting your tax obligations on-time the ATO are likely to be reasonable and agree on a repayment plan.
- The ATO want the debt repaid and they want you to continue meeting your ongoing obligations, so it’s in their best interests to assist with payment plans.
- The ATO may remove the interest obligations on the debt if you stick to the payment plan and continue to meet your ongoing tax obligations.
- Payment plans can vary depending on the amount payable and the circumstances. They can also be tailor made to coincide with your cash flow circumstances. The can be set for periods up to two years but not usually more than one year.
Option 3 – You can bury your head in the sand and hope that it will go away
- Sorry, it’s not going away.
Option 4 – You could go bankrupt
- However note that certain debt relating to employee PAYG withheld & employee superannuation will never be wiped from your slate.
- Other amounts payable to the ATO can be cleared if you go bankrupt.
- Going bankrupt has a whole lot of other implications that can be to your detriment, and should be your last option after you’ve considered everything else
The ATO website has further information about help with paying your tax.
Other related blogs:
What company debts can directors be personally liable for?
Author: Adrian Wardlaw
Email: adrian@faj.com.au
