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Despite our best intentions we can all find ourselves in a position where we don't have enough in the coffers to pay our BAS or TAX debt.
Here is the good news.
The Australian Taxation Office (ATO) have relaxed their stance on this of late and have made it pretty easy to enter into a payment plan when times are tough.
Here is the ATO's position is: "You still need to lodge your activity statements and tax returns on time, even if you can't pay by the due date. You'll avoid a penalty for failing to lodge on time and show us that you're aware of your obligations and doing your best to meet them."
Imagine what that will mean to your business and your life. Manageable solution with clear plan ahead for you and your business.
Better still "If you're a small business with an activity statement debt you may be able to pay it off interest-free over 12 months. You need to have a good history of tax lodgments and payments." says the ATO.
Downside? If you pay late or enter into a payment plan, you will generally have to pay interest on top of your debt.
Before You Contact The ATO
When attempting to make the payment arrangements, the ATO may request certain information from you such as how the debt arose and why you can’t pay it.
Organise, don't agonise.
There are many important questions to answer - the most important ones are:
- How you plan to pay it? How much? How Frequently?
- When you can make your first payment?
- What you’ve done to avoid these circumstances in the future?
Your bookkeeper would be easily able help you with the these issues:
- Your average monthly income and expenses
- Your major assets and liabilities
- Details of your current debtors and creditors (where applicable)
Also think about the following:
- Who you bank with and the balance of your account?
- Whether you have an overdraft facility?
- Whether you can sell or borrow against an asset to clear the debt?
- What type of business you operate? (where applicable)
How to do it
First of all go and do an estimation of what you plan could be like, click here for the Payment plan estimator.
1. Do it yourself - You can use the ATO's online services, which are available 24 hours a day if you are an individual or sole trader have an income tax or activity statement debt of $100,000 or less.
To do this you will have to link your myGov account to the ATO. A myGov account can be set up in a few steps at my.gov.au
2. Automated Phone Service - You can call up to organise a late payment or instalment payments. You'll need your tax file number (TFN) or Australian business number (ABN).
Be aware that this is automated and you may get stuck in a loop if you don't like the automated suggestions for the payment plan. The number to call is 13 28 65 (for individuals) or 13 72 26 (for businesses).
3. Ask a BAS Agent - BAS agents like aVers can negotiate payment plans and remission of general interest charges and penalties on your behalf. In the past we have successfully negotiated interest and penalty remissions of up to $15,000.
If your time is valuable and you would rather us take care of the painful negotiating part let us know. We will require you to sign an authority to act as a BAS agent form before we can do this for you.
If your tax debt is more than $100,000, there is a special number to call 13 11 42.
Don't be afraid to do this.
The ATO again is taking the reasonable stance that "If you're trying to do the right thing, we're committed to understanding your situation and helping you where possible."
In these cases where your debt is higher be prepared to talk about your financial situation and circumstances to make it easier for the ATO to find a payment plan that is manageable and reasonable. In some instances you may have to show proof that your business is viable.
Words Of Wisdom
- Always set up a process to put aside money on a regular basis to cover your ATO liabilities. It is always best business practise to pay your tax debt by the original due date where possible.
- If you default on a payment plan, you may find that the ATO impose stricter requirements if you ever request a plan again. Eg. They may require a higher upfront payment or require you to go onto direct debit.
- Don’t lose sleep over your tax debt, call and talk about it. The ATO will generally be supportive if you take the initiative.
- If it all gets too much call your BAS agent to help you out. It may cost a small fee but it may be worth your anxiety.
There is a light at the end of the tunnel and it is not an oncoming train.