Revive Financial

Benefits of an ATO Payment Plan

Written by Revive Financial | Jan 24, 2019 12:59:00 AM

Struggling to lodge and pay your tax? The worst thing you can do is stick your head in the sand. By letting the ATO know about your situation, you can avoid worsening debt and potential legal action. You may also be able to apply for a payment plan to spread the cost.

What is an ATO payment plan?

An ATO payment plan is a formal agreement made between the ATO and an individual or business with tax debt. Like other types of payment plan, it allows you to pay back what you owe in instalments over an approved period, instead of at once in full.

Under an ATO payment plan, interest is charged on the amount owing. However, if you’re a small business with activity statement debt you may be able to pay it off interest-free over 12 months, provided you have a good history of tax lodgments and payments.

Why enter into a payment plan?

Having tax debt is a serious issue and can lead to serious action being taken against you or your business. By entering into a payment plan, you’re agreeing to pay your debt but in manageable chunks. This can help you avoid further financial strife.

If you don’t enter into a payment plan and continue to leave your tax debt unpaid, the ATO may claw what you owe back from your future refunds or credits or call in an external recovery agent.

Beyond this, they can take more serious legal action including issuing a garnishee notice, director penalty notice, or a statutory demand. If you fail to respond to the latter, your business may be wound up in court.

Importantly, if you enter into a payment plan, don’t default on your payments. Doing so may result in the ATO imposing stricter requirements before agreeing to a new one.

Do I qualify for a payment plan?

Any individual or business with tax debt can apply to the ATO for a payment plan, provided the debt isn’t in dispute.

How do I set up a payment plan?

If you’re a sole trader, or your income tax or activity statement debt is under $100,000, you can apply for an ATO payment plan online. You’ll need a MyGov account linked to the ATO to do this. Use their payment plan estimator to work out what you can afford.

Alternatively, you can arrange a payment plan or make a late payment by calling their automated phone service. Make sure you have your tax file number (TFN) and Australian business number (ABN) to hand.

If debt is over $100,000, you must call to discuss your options. They may need more information on your circumstances before a payment plan can be agreed. To help your case, be as transparent and proactive in improving your situation as possible.

Using an agent? They can register for you via the Tax Agent Portal or BAS Portal.

What if a payment plan can’t be agreed?

If you’re unable to agree a payment plan, the ATO might consider accepting an offer of security instead to delay payment of the debt. Preferred securities are a registered mortgage over a freehold property or an unconditional bank guarantee from an Australian bank.

Another option is to apply for a tax debt loan. This can be used to pay off your debt, or provide an up-front payment to secure a payment plan and the interest may also be tax deductible.

If paying your debt would cause serious hardship, such as not being able to feed or provide accommodation for your family, the ATO may release you from some or all of it.

Make a payment plan, your plan

The ATO created payment plans to help struggling individuals and businesses, so if you’re unable to pay your tax debt, apply for one. While you’ll likely incur interest, you’re giving yourself the chance to get back on track and prevent things from escalating.

For more information on business tax debts, check out our tax debt page here. 

If you’re struggling with tax debt, or in a financial situation that’s getting more difficult to handle alone, try our Instant Online Assessment to see what your options are. Alternatively, contact us at 1800 534 534 for professional, and non-judgemental advice.