Every three months or so business owners will be aware that their BAS and PAYG installments will soon be due. These payments of course don't include personal tax returns. Quarterly superannuation payments can also stack up at the end of every three month period.
For many business owners, now is the time they begin planning how they are going to get the money together to meet their personal income tax returns along with regular BAS and PAYG commitments. It can feel like an ongoing headache that never stops, I know.
For some people, it can be a stressful time as they realise they have not put enough cash aside to pay their tax and will be facing the problem of a tax debt which the ATO is getting more aggressive about recovering these days. So what steps can you take to solve the problem?
Okay, firstly I will be annoying and suggest that from now on you put aside a percentage of your profits each month to cover your tax payments, a good ongoing structure to meet your future obligations will contribute to setting up a successful payment plan. We are very happy to discuss these finer points planning with you.
If you can’t pay your tax on time we suggest to our clients that they contact the ATO before they begin taking action against you. They tend to be much more helpful if you are proactive and let them know how you plan to sort it out, rather than avoiding them.
When your debt is not too large, for example debts under $25k, ii is likely that you can set up a payment plan using the ATO’s automated system either on the phone or online. You can take up a payment plan to give you more time to pay your tax debt off. This may require some kind of initial deposit, followed by a series of monthly payments until you have cleared the debt. Payment plans do not usually exceed 24 months and are more common around 12-18 month terms. This is a very clean way to solve the problem as long as you have the cash flow to meet your monthly payments. They are very strict that monthly tax debt payments are made, and if you default once, they will need a reason why and will probably restructure a new plan for you, or not allow any new plans to be made.
If a payment plan is not offered by the ATO, or you know you are just not going to be able to meet their demands, another option is to refinance your home loan to include your tax debt. We refer to this as a tax debt home loan. Similar to other consolidation loans, it allows you to pay off your ATO debt from your refinanced home loan. To do this you will need to have some amount of equity in your home loan, and we have lenders who allow some late payments and arrears with your existing home loan payments.
This is a common tactic used by business owners with unexpected tax debts that don’t want to be forced to shut down and face bankruptcy by the government. So if you think you will struggle with upcoming tax debts, save the stress, save money, and contact us for advice today.