Small Business and ATO Tax Debt

Posted by Georgia Kirby on Aug 2, 2017 7:00:57 AM

For small businesses, tax time is always fun! If you’re at the stage of getting ready to lodge your quarterly BAS then you likely have a lot of different questions; What are the due dates for GST? What penalties are there if I'm late with my BAS? How often do I have to pay PAYG?

The lodgement dates and useful information regarding both this and payment can be found clearly on the Australian Tax Office's website. You can see all the lodgement dates here – but note that these can vary for tax agents.

However, if you’re looking for  information regarding other things you may have to look a little deeper. We’ve put together a quick rundown of what to look for if you think you won’t be able to get your tax in on time:

What If You Can't Lodge and Pay On Time?

Some businesses think that because they can’t pay, they shouldn’t lodge, which is one of the biggest mistakes they can make and only makes the situation worse. There are separate penalties for failing to lodge and failing to pay. However, both the ATO and credit agencies often look more favourably on businesses that lodge even if they can’t pay immediately – so it is always good practice to lodge on time.

You should contact the ATO as soon as you can if you can’t lodge or pay by the due date. Their first requirement will be for you to submit any outstanding returns before a payment plan can be put in place. However, in order to prevent incurring any unnecessary penalties you may at least be able to arrange an extension.

The thing to you must remember here is to be proactive. The ATO isn’t out to get small businesses and if you are willing to work with them, they can be pretty accommodating. If you contact them early this can prevent any problems arising before it starts.

Penalties For Not Paying

It’s not in the ATO’s interest to be collecting tax debts to the point where it will hurt and potentially damage businesses. However, they are definitely cracking down on businesses that are racking up tax debt and not paying it off.

It is important to note that if you are able to arrange a payment plan with the ATO, all subsequent BAS payments are due in full and on time – if you miss this, then the ATO can cancel the payment plan and the full debt becomes due!

Your tax debt will initially accrue interest (regardless of whether or not you have the payment plan in place) and the ATO will apply any tax refunds you are due to reduce your debt.

If there is no payment plan in place, the next step the ATO will take is to refer your debt to an external collection agency (think Dun & Bradstreet and Collection House). This is where it can get a bit dangerous in regards to your credit score. (If you want to find out more about exactly what the ATO can do with your tax debt information, read our blog post on ATO tax arrears.)

If the problem still persists after that, the ATO will likely take stronger action, which could involve court notices and legal action. This is a worse case scenario and it rare for it to get this far – but still be mindful of how serious things can get if you try to just ignore the ATO.

Topics: TAX


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