Payment Plans with the ATO
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At Loan Saver Network, we speak to many businesses regarding their BAS, GST and tax payments. As such, we gain a good understanding of where a business has issues with its ATO obligations. Indeed, many different taxes require payment; along with ATO requirements to meet your obligations. Certainly, it can be easy to make a mistake and be left with a tax debt.
BAS and GST Lodgements
Every financial quarter a business must lodge its BAS and/or IAS plus make the BAS payment. Also, included in your business activity statements lodgement is:
- Firstly, the applicable GST to be paid.
- Secondly, PAYG instalment for employees
- Finally, the assessment of PAYG for your company tax obligation.
We find errors that could start with the business activity statement (bas) lodgement as some confusion arises between the PAYG for employees calculation and your company PAYG. Additionally, if you don't pay yourself a wage each week or month; your accountant will calculate your income tax return at the end of that specific financial year. As such, unknowingly, the personal tax debt can quickly mount up over the year.
What are the various taxes payable?
- Firstly, PAYG for employees
- Secondly, PAYG for companies
- Then, GST
- Superannuation
- Importantly, the owner's income tax.
Tax debt can quickly occur when you have made a mistake with your accounting. Plus, in most cases, two years may have passed before finding the tax mistake. Therefore, two years of tax payment is required.
ATO Debt Collection
The ATO can be quite aggressive in collecting on a tax debt. As such, you might view the ATO as a double-edged sword - one sharp edge and one blunt one. Therefore, if you communicate appropriately, they will work with you to resolve the problem. However, if you try to hide and don't respond, then they will seek to close your business.
See related ato hardship and tax debt questions.
A simple way to manage your tax obligations
There are several simple ways to manage your tax obligations. However, as you put on employees and grow your business, the tax obligations become more challenging to control yourself. Consequently, we recommend employing or contracting a bookkeeper to manage your BAS lodgements. However, if you don't have a bookkeeper and need a simple method in the interim, then try:
- Put aside a percentage of your profits each month to cover your tax payments. As such, you can calculate the amount required from your previous years' tax paid. Therefore, add up the total of all the tax paid in past years. Such as GST, Personal income tax, company tax then calculate total tax as a percentage of your income.
If you can't pay your tax on time, we suggest to our clients to contact the ATO. The ATO is quite helpful if you are proactive in managing tax arrears, and you may be able to set up a payment plan.
Setting up a payment plan with the ATO
When your debt is a small amount under $100k, and all lodgements are up to date; you could set up a payment plan over the phone using the ATO automated system.
The ATO has guidelines regarding ATO hardship and approving payment plans. As such, a payment plan is an excellent approach to resolve any tax debt and prevent escalating to legal debt collection.
- Firstly, you can set up a payment plan to give you more time to pay your tax debt off.
- Secondly, you may be required to pay some initial deposit.
- Thirdly, by a series of monthly payments until you have cleared the debt.
- Finally, payment plans do not usually exceed 24 months and are more common around 12-18 month terms.
Payment plans are a great way to solve the tax debt problem. However, you need to ensure you have the cash flow to meet your monthly payments. The ATO is stringent on monthly tax debt payments. Hence, if you default once, they will cancel the payment plan.
What if the ATO rejects your tax debt payment plan?
The ATO won't approve a payment plan for their tax debt in all cases. Indeed, you may be able to meet their requirements. However, other options available to you include using finance options to repay your tax debt. As such, there are several options:
- Firstly, obtaining business caveat loans and second mortgages.
- Secondly, using unsecured business loans such as invoice factoring and supplier financing options.
- Finally, Tax debt loans require a refinance of your home loan to pay your tax debt.
All these options below are very different finance products. Consequently, each finance solution is suited to a particular purpose. Hence, you can read about in the business loans pages.
Similar to other consolidation loans, these tax debt finance facilities allow you to pay off your ATO debt either by keeping your existing home loan or by refinancing your home loan. To do this, you will need to have some amount of equity in your home loan. Also, we have lenders who allow some late payments and arrears with your existing home loan payments.
Business owners often use tax debt finance to pay unexpected tax debts to avoid a forced liquidation or ato bankruptcy. So if you think you will struggle with upcoming tax debts, seek professional advice at Loan Saver Network and contact us today on 1300 796 850.
Let's talk about a solution that suits you