Last July, over 22,000 Australian businesses received warnings from the Australian Taxation Office for having tax debt over $100,000 that is more than three months late.
The ATO is on the hunt for a staggering $5 billion owed by businesses fitting this criteria.
They’re setting a firm boundary to make things fair for everyone in the business community and to keep the playing field level for businesses doing the right thing by staying on top of their debts.
How do some businesses find themselves in the position of facing this warning from the ATO?
Sometimes, unexpected expenses crop up, or sales may not meet projections.
You could also face cash flow issues, especially if clients pay late.
Whatever the reason, it’s a common challenge and nothing to be ashamed of.
If you’re in this boat, you’re likely feeling stressed, groping for a solution while the clock ticks away, adding even more pressure.
The key is to address your business tax debt as soon as possible. But how?
Take a deep breath because help is available! This article will guide you through your options.
What Happens if You Don’t Pay
If you have one or more debts with at least $100,000 overdue by more than 90 days and you have not engaged with the ATO to manage the debt, they will send you a “notice of intent to disclose business tax debts.”
This official warning basically tells you that they plan to share your overdue tax debt information with credit reporting agencies, making your financial struggles public.
Once that information is out there, it can damage your credit rating and affect your business relationships.
But it doesn’t stop there. On top of the amount you owe, you’ll also see fines and accrued interest piling up.
These could also cause your credit rating to take a hit, making it harder to get financing for future projects.
What Help Is Available
The longer you wait to sort out your overdue tax debt, the bigger the impact on your business.
Early action can prevent added fines, interest, and damage to your business reputation.
ATO Payment Plans
If you get a “notice of intent to disclose,” you have 28 days to either pay your debt or set up a payment plan with the ATO; otherwise, your debt will become public information.
The ATO wants to help you.
The payment plans and other solutions they offer allow you to pay back your debt in instalments, making a big difference in managing your cash flow and reducing stress.
Working with the ATO involves any of the following:
- Having a payment plan and sticking to it.
- Asking for a release from the debt.
- Challenging a tax decision related to your debt.
- Being under review by the Administrative Appeals Tribunal (AAT).
- Filing a complaint about your debt with the Inspector-General of Taxation Ombudsman (IGTO).
Consult an Accountant or Tax Agent
Tax professionals like accountants and agents can offer a lifeline when you’re hit with a notice of intent about your business tax debt.
Here’s how they can help provide immediate relief.
- Assess the situation: They’ll first take stock of your financial status to understand how much you owe and why.
- Negotiate with the ATO: Armed with this information, they can talk to the ATO for you. They may arrange for an extended deadline or possibly reduced penalties and interest.
- Payment plans: Your accountant or tax agent can help you set up a customised payment plan with the ATO to make the debt more manageable.
- Legal guidance: Tax laws are complex. An expert can help you understand your rights and responsibilities so you don’t make your situation worse.
And here are the long-term solutions a tax accountant or agent can offer.
- Budgeting and planning: They can set up a realistic budget for your business to prevent future tax issues.
- Financial review: They’ll regularly review your finances to help keep your business on track.
- Tax planning: By planning your taxes effectively, an accountant can take advantage of credits, deductions, and incentives you may not be aware of.
- Education: They can also educate you on best practices for financial management to avoid future pitfalls.
By hiring a tax professional early on, you’re not just putting out a fire—you’re installing a sprinkler system to prevent future fires!
Get Expert Advice
Facing a notice of intent on your business tax debt is a wake-up call, but with professional help, it’s not the end of the world.
From negotiating with the ATO to setting up payment plans and offering long-term financial strategies, having a tax professional on your side is invaluable.
Don’t let your business sink under the weight of overdue tax debt!
The finance and taxation experts here at Pherrus can help you navigate your current challenges and equip you with the tools to avoid such pitfalls in the future.
Whether you’re a sole trader or partner in a company, act now to regain control of your financial situation and peace of mind.
Fill in our online form today or call +61 (02) 9099 9109 to book an appointment at our Bella Vista office in Sydney, NSW.