Once we arrange a tax plan for you from the ATO, we may then look at your income, your business structure, or your finances, and devise a plan that will ensure that you are taking all the potential steps in minimizing your future tax liabilities. Arrangements for the organization of the ATO payments help to manage a tax debt which may be stressful, particularly when these outstanding amounts accrue gradually each month and each quarter. Payment arrangements with the ATO will enable you to pay off tax debts in installments over up to two years, meaning that you can plan your payments in a way that is easier for your current finances. As an example, following the 2008 global financial crisis, the ATO was very keen to let taxpayers into Payment arrangements for as long as 2 years, without any interest being due.
While the ATO will understand if it is required for you to enter into a Payment Arrangement for the first time, they will be far less sympathetic if you miss your agreed repayment date. In addition, you will have to lodge returns and make timely payments on any new tax liabilities that come due whilst a Payment Arrangement is in place for the older liabilities. If you missed an expected installment and/or did not pay your other tax obligations by the due date, you still might have time to make payments before the payment arrangement goes into default. We realize it may sometimes be hard to make full payments on a due date, however, you may be able to establish a payment plan that pays off the debt in small, manageable payments over some time.
If you cannot afford to pay taxes in full, or if you are having difficulty paying back the state because of an overpayment of homestead or elder care exemptions, a payment plan can help. A monthly payment plan helps taxpayers repay their tax debt, one small payment at a time, while also avoiding steep penalties for nonpayment. The ATO has created repayment plans to assist struggling individuals and businesses, so ask about one if you are struggling to repay your tax debt.
If you owe debts to the ATO, your tax agent can set up a payment plan online, no phone call is required with the ATO. The ATOs online Payment Plan Estimator can help you figure out how to repay the debt, or you can seek the assistance of a financial advisor. If you are a sole proprietor or have a tax debt or business statement that is under $100,000, you can request a payment plan from the ATO online.
If you are a small business owner who has a liability on your activity statement, you can make arrangements to pay it off interest-free. Small businesses owing amounts on their activity statements may be able to arrange interest-free payments for up to 12 months. A debt tax plan or loan may be used to settle the debtor’s make down payment or to establish a repayment plan, with interest also eligible for deduction.
Any individual or business with tax debts may apply for an ATO Payment Plan, provided that the debt is not in dispute. What is generally not considered by a business owner or advisor when negotiating the payment plan is the adverse effect an ATO tax debt can have on a credit score. Most importantly, if you fail to make payments on your plan, your situation will be passed on to enforcement, where ATO will prosecute you for your unpaid debt with no further negotiations.
ATO is generous enough to offer affordable solutions for paying back tax debts; so, do not fail on payments. We might even go so far as to say that the ATO is extremely forgiving. While, at first glance, a payment arrangement with the ATO might seem attractive, several reasons would lead us to caution your clients against appealing immediately to the ATO to extend a payment plan.
Beyond repayment, it is also incumbent upon accountants to assist clients in facing the potentially burdensome task of proving to the ATO their lawful right to a JobKeeper. With the ATO signaling, that they are actively looking for tax debts, it is worthwhile knowing the options for crediting tax debts, rather than risking garnishment or an admin charge notice.
A garnishment may result in a customer being forced into a second or third-tier lender, which will have a far higher interest rate attached to any loan. Another problem for customers entering into repayment arrangements with the ATO is customers need to agree to keep up-to-date with tax liens. If you fail to keep your commitments, the ATO will evaluate whether or not your business is viable and whether or not you should stay open. In such an event, the ATO will advise a business whether they are meeting reporting criteria, and give them 28 days to contact the ATO and take steps to avoid having that tax debt information reported.
Tax agents and BAS agents will be able to change the payment plans via online services agents, however, they will not be able to change a payment plan or an installment schedule where payment is made by direct debit from a credit card or debit card, this is available to only the cardholder. While regulators might be open to extending payments, there are strings attached right now. According to the ATO, upgrades would allow for repayment plans with a lump sum tailored for various customers, and also a set installment amount which has been managed for customers in similar circumstances.