How to Better Manage and Reduce your Tax Debt
If you are in the unfortunate position of not being able to meet your ATO liabilities as and when they fall due, you need to be careful about how you deal with this situation.
One option is to seek finance from a specialist lender to cover your obligations. The benefit of this is that the ATO doesn’t become a potentially vexatious creditor whose presence in your creditors listing will generally trigger default with your bank or other lenders.
Repayment arrangements with the ATO
Alternatively, you can enter into a repayment arrangement with the ATO. Whilst this has traditionally been the preferred option for most businesses (usually on the recommendation of their internal or external accountants), there are signs that the ATO is becoming more stringent in their requirements both in terms of whether they will provide you with a payment plan, and if so on what terms.
Similarly, their criteria for the remission (or refund) of interest charges and penalties are now being applied more strictly and remission is more difficult to obtain.
In addition to any financial penalties, if you are unable to meet a payment to the ATO (either under or outside a payment arrangement), then the ATO will notify relevant credit bureaux which will adversely affect your credit rating.
The bottom line
We strongly urge caution if you have an unfunded ATO obligation and you decide to enter into an arrangement with the ATO.
In addition to any advice your Accountant may provide, we suggest you also meet with a taxation debt advisory specialist who understands the ATO’s tight rules and regulations and work with you, your business and your financial and accounting advisors, to:
- Negotiate with the ATO to obtain a suspension of recovery action and obtain the necessary time to implement a solution to repay the debt;
- Negotiate a remission (or refund) of accrued interest and penalties so as to reduce the overall ATO debt; and
- Pay the ATO debt and, if required, negotiate an optimal and commercially sustainable Payment Arrangement for any residual debt.
If you already have your business taxation debt under arrangement with the ATO, these specialists can also work with you to:
- Confirm your Payment Arrangements are still active;
- Negotiate optimal and commercially sustainable payment Arrangements; and
- Negotiate the remission of interest and penalties so as the reduce their overall debt.
If you would like to review your ATO position and receive recommendations, contact us here.
