Paying tax debts is one of the biggest challenges a business can face. But, if you’re struggling to meet your tax obligations, ATO debt relief may provide the lifeline your business needs to survive.
Businesses fall behind in their tax obligations for a range of reasons – often beyond their control. A large tax debt can cripple an otherwise viable business to the point that it may not be able to continue.
Negotiating a payment arrangement with the ATO may be a great way to manage your tax debt if you can’t pay it in full when due. We look at how an ATO payment arrangement can help you below…
ATO debt relief can help cashflow management
Accountants can be a great help for businesses in negotiating ATO debt relief by way of payment arrangements with the ATO.
This is usually straightforward when a business is generally complying with its ATO lodgement and payment obligations but just has one or two unpaid lodgements. This is also providing any previous payment arrangements have not failed.
In the 2015/2016 financial year, the ATO entered into 950,000 payment arrangements with various entities. So, they are an important cashflow management tool for many Australian businesses.
Simply put, ATO payment arrangements can help businesses manage cashflow by breaking up quarterly BAS liabilities into smaller, affordable instalments.
In more serious cases, obtaining ATO debt relief can be a lifeline for a business, providing a window to fix the underlying causes of the payment problems and turnaround performance.
Debt relief for businesses with large outstanding tax debts
When businesses fall behind on their ATO lodgements or payments, or have failed a number of previous ATO payment arrangements, their accountants or lawyers often refer them to us.
These are often businesses that fall under one or more of the following categories:
- They have had (or are about to have) a superannuation audit
- The ATO have rejected a payment proposal put forward by an accountant
- They have just lodged a number of outstanding lodgements and now owe the ATO a large debt
- They have a number of BAS, IAS and superannuation guarantee charge lodgements outstanding and are considering their options
- The ATO have issued letters regarding proposed enforcement or recovery proceedings
This can be very stressful for business owners, but we are able to relieve that stress by engaging with the ATO on their behalf, in order to:
- Stop further recovery action
- Help formulate a payment arrangement that the business can afford and the ATO is likely to accept
- Obtain remission of penalties and interest, reducing the business’s overall tax debt
Regardless of your situation, engaging the ATO in communications will always result in better outcomes than trying to ignore them.
What the ATO can do to recover outstanding tax debts
If there is no such engagement with the ATO and a payment arrangement is not entered into, the ATO may issue any of the following:
- Director penalty notice – potentially making a company director liable for the company’s outstanding PAYG and/or superannuation debts
- Garnishee notice – issued without warning to a company’s bank or a customer, requiring them to pay money held or owed to the company, to the ATO
- A statutory demand and winding up notice – which may result in the court appointing a liquidator to the company
Large tax debts are common and result from a wide variety of reasons. It’s important to work with the ATO to relieve the stress and burden on the director so they can make the right decisions for their business.
If your business finds itself in this position, or you have already received an ATO notice warning of intended enforcement or recovery action, do not waste time. Call the ATO yourself or speak to your accountant about negotiating a payment arrangement.
If unsuccessful, get in touch with us for help negotiating an arrangement to prevent further enforcement or recovery action, or to consider your options. We may be able to negotiate affordable ATO debt relief on your behalf, help you better manage cashflow or turnaround profitability, and avoid insolvency.