The Australian Taxation Office (ATO) is the organisation responsible for collecting taxes from residents of Australia. But what happens if you can’t afford to pay your taxes on time? You might be hesitant to file your tax returns again next year, but luckily, the ATO has payment plans available to help you get back on track with your taxes.
With ATO Payment Plans, you can spread out the cost of paying your tax debt over weeks or even months! This article will explain everything you need to know about ATO payment plans. Read on if you want to learn more about the ATO payment plans and how they work!
What is a ATO payment plan?
A payment plan is a convenient way to meet your financial obligations.
A payment plan allows you to divide your payment into smaller amounts that are paid in instalments over a set period of time. A payment plan requires you to repay a sum of money weekly, biweekly, or monthly until the balance is paid off.
ATO Payment Plans are available to most businesses that owe taxes to the ATO. You may be eligible for a payment plan if you:
- Can’t pay your tax debt in full
- Can pay off your debt within two years
- Are up to date with your lodgements
- Have a good payment history
Why should you enter into a payment plan?
Tax debt is a serious issue that can result in serious consequences for you or your business. By entering into a payment plan, you agree to repay your debt in manageable instalments. This can assist you in avoiding further financial difficulties.
If you do not enter into a payment plan and continue to ignore your tax debt, the ATO may deduct what you owe from future refunds or credits or engage an external recovery agent.
They can also take more serious legal action, such as issuing a garnishee notice, director penalty notice, or statutory demand. If you do not respond to the latter, your company may be wound up in court.
Importantly, if you enter into a payment plan, make sure you don’t fall behind on your payments. If you do this, the ATO may impose stricter requirements before agreeing to a new one.
| See related links for Director Penalty Notice
What You Need To Do Before You Set Up a Payment Plan
When considering establishing a payment plan, keep the following factors in mind:
- how much you can afford to pay in order to meet each scheduled instalment (including interest from overdue amounts)
- your future responsibilities
We also recommend that you use the ATO’s online payment plan estimator to determine an affordable payment plan. This tool will also assist you in determining how quickly you can repay a tax debt and how much interest you will be charged. The longer you wait to repay your debt, the more interest you will have to pay.
Once you’ve determined an appropriate payment scenario based on your circumstances, you can use it as a guide to creating a payment plan to meet your tax obligations.
This estimator cannot be used for super guarantee charge debts.
Important Information for Taxpayers Who Choose a Payment Plan
Any tax credits or refunds you receive will be applied to your tax debt but will not be used to replace the required instalment payment. This is known as offsetting. Offsetting is when the taxation office uses a credit or refund of one account to pay off a debt on another.
GIC (general interest charge) will be charged until the debt is paid in full.
At any time, you can make extra voluntary payments or pay off the debt.
You must still file your activity statements and tax returns on time, as well as pay any associated liabilities.
What if a payment plan can’t be agreed upon?
If you are unable to reach an agreement on a payment plan, the ATO may consider accepting an offer of security in order to postpone payment of the debt. A registered mortgage on a freehold property or an unconditional bank guarantee from an Australian bank is preferred securities.
Solve Your Tax Problems
If you feel this information does not fully cover what you need or are unsure how it will apply to you, always seek professional advice. The ATO has many services to assist you, and their contact details can be found on their website. Find out about Small Business Restructuring
If you are struggling to stay on top of your tax debts, it may be time to seek professional help. Here at Small Business Restructuring Specialists, we offer a range of services designed to help you get your company tax affairs in order. Give us a call today on 0420 896 000 or book a meeting to find out more.
