The Australian Taxation Office (ATO) has very effective weapons at its disposal if tax debts have not been paid or tax repayment plans are not kept up to date. The ATO can issue garnishee notices on your business and serve directors penalty notices of you personally, both of which can have horrible consequences.
The ATO has been and will continue to be one of the biggest factors in the liquidation of businesses. Your concern should be to seek clarity on your predicament to take back control of your business.
When you find your business in financial distress, and the reason is outstanding trading debts, particularly tax debt, it’s important to seek expert advice.
Concerns for the economic consequences of the COVID-19 pandemic and recent price of living increases have been a source of unexpected stress and adversity for many people. In particular, tax debt is a significant worry as it is often the last business debt to be paid behind suppliers.
How to Pay Off Your Tax Debt
Find options on negotiating business tax debt relief and how you might be able to move out of that distress as well as maximise protection of your personal assets and find peace of mind. It is very important to avoid the ATO taking action to recover tax debt owing.
The ATO will consider proposals for repayment plans even for large tax debts outstanding. However, the key is to communicate with the ATO and be armed with up-to-date financial information and be open and respectful.
The ATO may also waive some penalties and/or interest.
Repayment periods of up to two years are possible to be negotiated with a small deposit upfront. The keys to a successful request for relief through a repayment plan are:
- Accounting up to date with prudent budget forecasts to understand the amounts you can afford to pay and for how long;
- All tax lodgements up to date;
- Having financial statements and a budget available for scrutiny by the ATO if it is a large debt;
- Repayment plans for smaller debts can be negotiated quite easily;
- Upfront payment available to pay; and
- Proposed repayment terms of X amount over X months (two years seem to be the maximum currently).
Example – Tax Debt Payment Plan
You have a tax debt of $500,000 which you currently are unable to pay.
You will need your Profit and Loss Statement and Balance Sheet updated to the end of the last month and all lodgements up to date.
You will need a Budget based on that Profit and Loss Statement and a Cashflow Statement for the next 12 months showing your forecast revenue and expenses. If you or your accountant has the latest Profit and Loss Statement, Climb Business can help you prepare a forecast Budget and a Cashflow Statement.
Depending on that Budget and Cashflow Statement, what can you afford to pay each month over a period of time?
The more preparation you put in before the request to the ATO, the better the terms of the repayment arrangement will be for you.
As an example, the result may be $20,000 monthly repayments over 2 years with a $20,000 upfront payment.
Business Tax Debt Advice
Highly impactful results can be achieved for your business with thought and preparation. Climb Business is very experienced in this process and has achieved successful outcomes for clients.
Start with a no-obligation chat with a financial councillor about where your business sits right now and how to formulate cash flow and debt solution strategies.