The necessary government restrictions on economic activity which have been put in place in an attempt to reduce the spread of COVID-19 have had a devastating effect on many businesses. For some, corona virus has meant an immediate cessation of trading; for others, the impact of the virus has been more subtle, but potentially as devastating. If affected, one of the key concerns which business owners have can be how best to keep up with their existing financial obligations, including ATO payment plans, when their source of income has dried up. Detailed below is our interpretation of the current ATO advice and support available.
Case-by-case support on offer
ATO is offering a variety of different support options for businesses. Depending on their current situation, this can include anything from rescheduling of current tax payment plans through to suspension of plans, deferral of plans and various other options. These measures are similar to those that were put in place for businesses affected by the recent bush fires. If you suspect that your business will be struggling to meet tax obligations now or in the immediate future, contacting ATO (or asking your accountant to contact ATO) is a priority. In addition to their usual methods of contact, the ATO will also be setting up a physical presence in Cairns in the next few weeks, if you would prefer a face-to-face consultation.
According to ATO, the following options are available:
– a low interest repayment plan if you’re unable to meet your current tax obligations. This predominantly relates to tax you already owe.
– the deferral of some tax payments. This can be an option for businesses that have had to come to a complete stand-still due to COVID-19. Particularly when the business has other financial priorities (for example making sure that valued employees continue to receive pay whilst the pandemic restrictions are in place), or simply don’t have the cash, a deferral can provide valuable breathing space.
– faster GST refunds. If you are a business that is eligible for GST refunds, switching to monthly refunds (rather than quarterly), could provide a welcome cash injection over the next few difficult months.
– revising your PAYG obligations to create a financial profile that’s going to be more sustainable over the next few months.
– removal of financial penalties for failure to pay tax on time and/or an agreement for an interest-free payment extension. This will be determined on a case-by-case basis. Contact ATO (or ask your accountant) for further information.
ATO want to help
The impression that we’re getting is that the ATO want to help businesses at this difficult time, but that there is a need for businesses to reach out to them pro-actively in order to get the help they need. There are clearly a range of different solutions on offer, which need to be tailored to each business in order to get the best fit for their needs.
We advise to act sooner rather than later
The earlier that appropriate arrangements are put in place to temporarily reduce tax burden, the more business cash will be available for priority payments. Not only can a pro-active approach decrease immediate obligation, it can also minimise the risks of financial penalties and interest on outstanding tax due to an inability to pay. Because the economic situation is so fluid at the moment, it will also be possible to revise arrangements as and when necessary. If in doubt, we suggest planning for a worst case scenario and deferring tax payments as long as is practicable: should worst case fail to materialise, you will be able to make over payments and swiftly bring your account back up-to-date.
Like the ATO, Pherrus are here to help
As a business ourselves, we are all too well aware of the impact which COVID-19 is having on us and our customers. We want to do our bit by providing practical accountancy help and support to businesses who are seeing the corona virus play havoc with their finances. In addition to providing assistance on how to get the best ATO arrangement for your needs, we can also advise on a range of other options to improve cashflow, offset losses, protect workers and appropriate planning to provide the best chance of bouncing back rapidly once the economy begins to get back to normal.
This is a trying time for us all: Pherrus Financial Services recognise that with so much else going on, the last thing you need is to be worried about is tax! We are here to help. Please get in touch for further support.