How to set up an ATO Payment Plan
Have a tax bill you can't afford?
Changes in the 2022/23 Australian financial year mean that many Australians owe the Australian Taxation Office (ATO) money. Having a successful year is one to celebrate but not budgeting for that tax bill can be a daunting feeling. What do you do? We break it down:
Can I pay the ATO in installments?
The ATO will consider payment plans for past due debts and it may be possible to pay a tax debt off over a longer period of time. How long the ATO will give you to pay a tax debt will depend on the taxpayer’s history and the amounts involved. It is not uncommon for the ATO to agree to installments for a period of 6 to 12 months. The issue can be that once a payment plan is in place, all future tax obligations must be lodged and paid on time in full otherwise your payment plan will be defaulted.
What are the alternatives to an ATO Payment Plan?
The only real alternatives for ATO payment plans are to raise additional finance to pay the debt out in full or consider an insolvency-based strategy. If you borrow money to pay the tax on your business income, the interest you pay on this borrowing can be tax deductible. Insolvency, such as liquidation or personal bankruptcy, will deal with any outstanding tax debt at that time. We recommend always talking to your accountant first before making any decisions on this.
Be proactive and plan
The best tax strategies rarely happen after the year's end. One of the services we offer is a tailored tax planning session prior to the end of the financial year to help you understand what your tax position will be for the current financial year and also to discuss any strategies to help reduce your tax.
Don’t go AWOL or not lodge
For some, there is a tendency to ignore or avoid lodging when you receive a large bill. This however only creates a bigger problem. The ATO is very helpful if you or your accountant continue to communicate with them, however by ignoring or not lodging, the tax office works on the basis that you are being deliberately non-compliant and can pursue you quite aggressively for the debt.