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Tax Debt

Tax debt: Organising a payment plan

Help:  I’ve got a tax debt.  I need a Payment Plan

The ATO is starting to ramp up its tax debt recovery actions. So if you have a tax debt it is very important to be proactive and organise a payment plan if you are unable to pay the tax debt in one lump sum.  Ignoring a tax debt can lead to bankruptcy or winding up.

Components of a tax debt

A tax debt generally comprises principal tax, penalties and interest.

GIC

The interest component is usually referred to as the General Interest Charge (GIC).  GIC can almost double a tax debt.  We can apply for a remission of GIC on your behalf.

This will require providing to the ATO the special circumstances which led to you falling behind in your tax payments.

Penalties

Penalties may be imposed for a variety of reasons including failing to lodge your tax returns on time or for making a false or misleading statement.

You are able to object to the penalty by objecting to the ATO decision which imposed the penalty.  Again, you will have to detail the special circumstances that should apply to reduce the penalty.

What can the ATO do if you have a tax debt?

The ATO has the following options if you have an unpaid tax debt:

  • Garnishee Notice.
  • Director Penalty Notice (DPN).
  • Statutory Demand.
  • Bankruptcy/Insolvency

Garnishee Notice

A garnishee notice is a notice sent by the ATO to your bank advising them to transfer the amount of the tax debt to your bank account.

You will not know that your account has been garnisheed until you receive a notice from the ATO advising that a garnishee notice has been issued for your tax debt.

Director Penalty Notice

A Director Penalty Notice is a notice issued by the ATO to the Director of a company which has unpaid PAYG withholding and superannuation guarantee payments and BAS payments.

If the company is wound up the Director becomes personally liable for the tax debt.  This can lead to bankruptcy if the director is unable to pay the debt.

Statutory Demand

A statutory demand is a formal, written request by the ATO requiring a company or individual to pay a debt within a stipulated time.

If the debt is not paid the ATO can then commence formal debt recovery procedures at the Federal court and appoint a trustee in bankruptcy or liquidator.

Bankruptcy/Insolvency

The ATO commences insolvency proceedings at the Federal Court by lodging a Creditors Petition.

How can I stop ATO debt recovery action

A payment plan stops the ATO taking debt recovery action provided you honour the repayments.

It is designed for a business or individual to pay their tax debt via instalments and allows businesses comply with their tax obligations while maintaining their cash flow.

It involves entering into an agreement with the ATO to pay to pay your tax debt through instalments. They are typically structured so that a tax debt is paid out over two years.  A longer period is possible using a security interest such as property.

What does the ATO consider when agreeing to a payment plan?

The ATO considers specific circumstances when negotiating a payment plan.  These include that the that the debt must not be in dispute, the proposal must be in writing, the payment plan must not show favour to any one creditor and the payment plan must be in the interests of good management and administrative common sense.

MESSAGE

If you have a tax debt, you should take action immediately because the longer the debt remains, the greater it will be.

We are experts in negotiating debt matters.  So if you have a tax debt and require assistance in liaising with the ATO, please contact us on 02 9252 8746 or tax@waterhouselawyers.com.au.

 

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