ATO Tax Debt Hardship Q & A


ATO Tax Debt Hardship Guides and Questions

Q: How do I apply for ATO Tax Debt Hardship?

A: Applying for ato tax debt hardship with the ATO is quite an easy process. However, gaining an ATO hardship approval needs to fit within the ATO policies. Consequently, there are several ways to improve your chances of approval for Tax Debt Hardship:

  • Call the ATO to discuss hardship and that you are unable to meet your obligations. Indeed, the ATO will make decisions based on their ATO hardship guidelines. Keep in mind, you will need to fully cover your circumstances and show financial difficulty. Also, the ato would seek a payment plan to cover the full tax debt account when determining suitability.
  • Firstly, business closure.
  • Secondly, disconnection of an essential service.
  • Also, repossession of vehicle for business purpose. Imminent legal action pending for non-payment of debts.
  • There are hardship review limitations. Such as, you cannot be approved hardship a substantial time after an event. Such as, you suffered an illness, and you applied for tax debt hardship two years after. As such, apply for the hardship the same specific financial year.
  • Finally, You cannot access bank accounts because of court orders.

ATO Hardship or Tax Debt Finance?

Navigating the ATO financial hardship policies is complex. Also, you will need supporting evidence for hardship to be approved. Likewise, successful tax debt hardship applications can take anywhere from 14-60 days to be approved. Hence, a faster solution such as caveat loans may be required to prevent legal action. Based on that information, speed is a critical factor; if you have time before legal proceedings then applying for hardship is a preferrable option. However, if there is little or no time, or have recieved a legal letter; finance to pay the tax debt may be a more suitable solution.

Australian Tax Office Website: Policy guidelines for ATO Tax Debt Hardship

Q: What is involved with ATO Tax Debt Negotiation?

A: Tax Debt Negotiation can give you a tremendous financial advantage. However, there are a few conditions the ATO requires before approving any tax debt reduction.

  1. The ATO requires all of your Bas lodged and financials up to date. Indeed, the ATO wants to understand the full tax debt obligation due. For that reason, the ATO will want to know the entire tax obligation, including interest and penalties to the account.
  2. Consequently, this may not be practicable as there may be a pending business wind up, bankruptcy, or court case for the debt. Furthermore, it is essential to disclose any court matters or wind up to us. As such, this can assist us in determining if a tax debt negotiation is the best solution for you.

ATO payment plans and negotiations are suitable when you have time and not when you are experiencing a severe tax debt hardship issues and pending insolvency action.

Q: Can I obtain a bank loan to pay tax debt?

A: Traditional lender policy will not allow lending for tax debt purposes. However, there are private and specialised lender able to assist.

  • Firstly, tax debt in the tax portal will prevent traditional lending approval. ATO Portal balances are confirmed.
  • Secondly, a traditional lender will decline loans because of tax debt.
  • Finally, specialised finance such as a tax debt loan can resolve the tax debt.

Q: What’s involved in borrowing to pay tax debt?

A: Borrowing to pay a tax debt is very much the same as traditional lending. However, there are some differences in policies because of the higher risk in loans for tax debt.

  • There are three main loan types suitable to pay for tax debt.
  1. Firstly, secured short term loans such as caveat loans and second mortgages.
  2. Long term loans similar to traditional finance.
  3. Unsecured Finance options, however, these can be very restrictive and unsuitable.

Caveat Loans

  • Requires Minimal income verification
  • Lower Loan Ratios
  • Higher fees
  • 24 hour - 2-week settlements.

Specialist tax debt home loans

  • Income verification and servicing requirements
  • However, there are low doc loan options available.
  • Also, credit issues are acceptable and reflect the pricing.

Loan Saver Network can assess the type of loans most suitable for your purpose.

Q: Are there business tax debt loans?

A: Yes, several short-term lenders offer business tax debt loans. They are also other business loans such as invoice factoring, and trade finance designed to provide working capital while continuing to trade.

Q: How to pay off tax debt?

A: You can pay your tax debt off via a payment plan. However, there are other ways, such as:

  1. Refinance using your home loan with a tax debt loan.
  2. Unsecured lending
  3. Also available are 2nd mortgages and caveat loans.

Q: I can't pay my tax debt, what do I do?

A: If you can't pay your tax debt, there are several options:

  • Tax debt hardship application which we have described here.
  • Secondly, obtaining finance to pay your tax debt
  • Thirdly, negotiating your tax debt with the ATO
  • Finally, remissions of the tax debt, penalties and interest.

If you are unable to pay your tax debt, make contact with us as soon as possible. Indeed, to reduce the risk of ATO legal proceedings or bankruptcy.

Q: Are there loans to pay off tax debt?

A: Yes, we would assess and provide a proposal advising what your most suitable course of action would be. As a result, there are several solutions for tax debt loans. However, choosing the right one can be the difference between staying in business or not.

Q: How can you be released from your ATO tax debt?

A: The ATO guidelines for relaese of tax debt relate to the type of tax debt and your situation. As such, in certain cases you may be able to be released from the tax debt however you need to show serious hardship if you were to pay the tax debt. Although, the term serious hardship is a grey area without clear guidelines.

We have seen cases where clients are released entirely from tax debt, though it is infrequent. As a result, the most common result is a remission of the penalties and the general interest charge (GIC). However, the ATO will want to assess all financials and BAS lodgment up to current date to allow them to understand your full tax obligation.

Types of tax debt eligible for release

  • Initially, personal income tax.
  • Also, PAYG income installments.
  • Medicare Levy.
  • Finally, general interest and penalties assocaited to the tax debts.

Types of tax debt not eligible for released

  • GST
  • Superannuation Gaurantee Charge for employees
  • Also, PAYG withholding tax for employees

In most cases there is a mix of tax debts payable that can and cannot be released. As such, in most cases you would require a mix of either relase of tax debt, ato payment plans, or help with tax debt loans to pay out the tax debt entirely. 

Contact us or seek professional advice to discuss your options. 

Q: I have a Tax Debt to the ATO, can I set up a payment plan?

A: Yes, if your debt is under $100,000, it can be set up via automated phone prompts. Also, you can set up payment plans direct with the ATO or their debt collection company. We find, the payment plans are mostly between 12-18 months and do not (usually) exceed 24 months.

All ATO tax obligations such as BAS lodgements, financials, and superannuation obligations would need to be maintained; otherwise, the tax debt payment plans would be cancelled. If so, legal action would continue.

Q: Why do I have a tax debt?

A: There are several reasons a tax debt can occur, which we have found tend to fall into the categories below:

  • Firstly, misunderstanding of your tax obligations. We see this is mostly the case with small businesses where the business owner didn’t understand all the taxes needed to be paid. Such as, misunderstanding of personal income tax, business income tax, GST, PAYG instalments and superannuation owed.
  • Secondly, your business uses ATO payments for working capital.
  • Indeed, illness or death in the family.
  • Marital issues.
  • Accountant issues.
  • Bookkeeping issues.
  • Finally, reduced business cashflow causing problems.

Q: Will ATO bankrupt me?

A: As an individual, yes. As a business, they can wind up your business under an involuntary business wind up.

Q: I received an ATO wind up? If my business closes, the ATO will get no money. Why?

A: The ATO has several mandates under their taxation provisions. As a result, if you don’t pay tax or manage your obligations:

  • Firstly, the ATO sees your business as causing a non-competitive environment of trade and will close your business.
  • Secondly, closing or winding up your business moves the revenue to a competitor. As a result, taxes start coming in from that business.
  • Thirdly, the ATO removes your business it brings competition back into your market space. i.e. the new business charges appropriately for services with consideration to the tax payable.
  • Finally, the sale of assets using Business Liquidation and director bankruptcy forces the recovery of lost taxes.

Tax Debt Video – The Benefits Of Consolidating Loans To Solve ATO Debts


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