Key Point Summary:
- Tax debt is a common issue for Australian businesses
- The ATO offers payment plans to help pay off business tax debt, but these may not always be suitable for all cases
- Tax Debt Loans can provide business owners with alternative solutions for managing tax debt
- Options include overdraft facilities, unsecured loans, equipment finance (as a way to raise capital), private lending, and more.
- Choosing the right solution depends on your business’s financial situation and credit history.
- Seeking professional advice is crucial when dealing with tax debt
As a business owner in Australia, managing your tax obligations is a critical aspect of keeping your business finances in check. However, circumstances can change — anything can happen and it can sometimes lead to your tax debt accumulating, putting strain on your business operations and growth potential.
While the ATO offers payment plans, these may not always be the most suitable or cost-effective solution for your business. Let’s explore various business loan solutions that offer a lifeline to clear outstanding ATO obligations, prevent enforcement action, and avoid further penalties so you can focus on growing your business.
Take action on your tax debt and speak to an expert.
Understanding Business Tax Debt
It’s common for Australian businesses to accumulate tax debt like GST, PAYG, and Superannuation obligations. Common causes include cash flow issues, unexpected expenses, and economic downturns. In many cases, businesses simply fail to take into account or properly estimate their tax obligations.
The ATO usually works with businesses with outstanding tax debt. However, if a business fails to engage with the ATO repeatedly, the ATO may resort to firmer action. This can include garnishee notices, director penalty notices, disclosure of business tax debts, and other legal actions.
Tax Debt Loan Solutions
If a payment plan with the ATO is not the right solution for your business, you have plenty of business loan solutions to choose from to help you manage your tax obligations.
Overdrafts: A Cash Flow Solution for Tax Debt
An overdraft is a line of credit that allows businesses to draw funds beyond their available balance, up to a predetermined limit.
Overdrafts can be a powerful tool for managing cash flow and this includes paying out ATO debt. While bank overdrafts typically require property security and must be in place before tax debt becomes outstanding, unsecured overdrafts can be obtained even with an outstanding tax debt balance.
The application process for unsecured overdrafts is quick and straightforward, with limits up to $500,000 available without financial documents. Funds are generally accessible the next day.
Unsecured Business Loans: Fast and Flexible Tax Debt Repayment
Unsecured business loans can be used when paying back taxes, with loan terms ranging from 1 month to 5 years, depending on the lender. These loans cater to business owners with bad credit as well as those who would qualify for a major bank loan if not for their tax debt.
A significant advantage of unsecured loans is their speed in application and settlement. Assessment is conducted through analysis of business bank statements, with some unsecured lenders providing approval and settlement fast enough for same-day funding.
Raising Capital Against Assets With Equipment Finance
By leveraging assets such as vehicles, trailers, equipment, or machinery, business owners can raise much-needed capital. Asset finance loans are secured, typically translating to lower interest rates. Equipment finance lenders are often more sympathetic to business owners with bad credit since the loans are secured by tangible assets. Unlike unsecured business loans that rely on historical revenue for eligibility, equipment finance providers can consider future business cash flow forecasts. This makes them a viable option for businesses experiencing a recent downturn or a period of unusually weaker revenue.
Private Lending: Flexible Borrowing Against Property Equity
Private lending offers a flexible solution for business owners to borrow against the equity they hold in property to pay out tax debt. Although typically short-term loans, some private lenders provide longer terms to differentiate their product offerings.
Assessments for private loans generally consist of a property valuation to ensure adequate security and an acceptable exit strategy to repay the loan at the end of the term. Given the unregulated nature of private loans, it is crucial to ensure your lender has a solid track record, accepts your intended collateral, and adopts a fair approach to fees, disputes, and collections activity.
Second Mortgages: An Alternative Route for Tax Debt Repayment
A second mortgage is a loan secured by a property that already has another loan secured against it, known as the first mortgage. In the event of default, the loan secured by the second mortgage is repaid after the first mortgage is settled in full. Second mortgages can be used when paying back tax debts and are available with fixed rates and interest-only repayments. Offered by private lenders, second mortgages do not require financials and can be funded faster than bank loans.
Debt Consolidation: Combining Tax Debts for Easier Repayment
If a business has a variety of tax debts that they need to pay off, debt consolidation is one viable option for them to manage their repayments easier. Debt consolidation is taking out one larger loan with potentially more favourable rates and terms and using it to pay off several debts. With consolidation, a business can pay off its different tax debts in one go and have only one loan to repay moving forward.
Finding the Right Solution for Your Business
Amid challenging economic conditions, Australian businesses can struggle to keep up with their tax obligations. To avoid issues with the ATO, businesses can turn to various tax debt loans and consolidation. Solutions like overdraft facilities, equipment finance, unsecured business loans, private lending, and second mortgages can help businesses manage their tax debt and be in the clear with the tax office.
By carefully evaluating their options, businesses can choose and leverage the most suitable loan solutions, helping them tackle their finances and secure a brighter future that provides tax relief.
For assistance with your tax debt loans contact us here.
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