The Australian Taxation Office is becoming more proactive chasing tax debts. With the recent federal election, supply chain disruptions, soaring costs in fuel and now an interest rate rise it is vital for taxpayers to get their tax debts under control.
We have noticed recently a distinct increase in the ATO’s efforts to recover overdue taxes. In the last 2 months the ATO has been noticeably more active with follow ups on overdue accounts. In some cases, they have requested current year business figures to determine a client’s ability to repay.
We had a recent case of a client with an overdue debt of $19,000 for business activity statement. The ATO requested the 2022 business figures and in their determination the client could afford $1,000 per week. This amount would have placed unnecessary pressure on the client, and we negotiated a lower amount, the end result as agreed was $600 per week. Whilst this was still a substantial amount the client could afford this amount and not be at risk of defaulting. If an agreed ATO repayment plan is defaulted the entire repayment plan defaults and renegotiation is not guaranteed.
There are some key things businesses can do to help clear their ATO debt faster.
Understand your state of affairs
Understanding your true financial position is the key to be able to clear your businesses ATO debt. This will allow you as the business owner to implement the most appropriate strategies to clear the debt and not overcommit.
If you are late paying or lodging any future tax a payment plan will default, as the ATO considers you non-compliant and can take enforcement action to recover the debt.
Enforcement action could include garnishee notices or making a director personally liable for a company’s GST, super and PAYG Withholding tax obligations.
Get in contact with your accountant
Seeking assistance from your accountant can help to achieve the best possible ATO payment plan. Your accountant can assist with preparing a strategy to meet your business cash flow needs and reduce your business debt.
The ATO imposed penalties and interest can drastically affect your balance sheet, working with your trusted accountant, you can put into place a payment plan with the ATO which could place a hold on any collection action and avoid further penalties or interest.
We recommend all business owners don’t delay and undertake a review of their business cash position. If your business requires assistance with your ATO debt and payment plan, please contact us at Welsh Tax. We would be happy to assist.