Key Takeaways
- It’s important to pay your tax debt as soon as possible to avoid General Interest Charge and enforcement action from the ATO.
- To pay off tax debt quickly, it's important to implement some strategies, starting with optimising your business cash flow.
- You can pay off your tax debt with your savings. You can also talk to the ATO to arrange a payment plan or negotiate for a compromise.
- Another great way to pay off your tax debts immediately is through tax debt loans, which allow you to borrow up to $50 million with secured and unsecured options.
- Other ways to pay off tax debt are by using your superannuation or applying for a personal loan.
- To help you choose the best strategy for your ATO obligations, you can enlist the help of a financial expert.
Getting into tax debt can be quite a burden on small businesses. Tax debt payments can be significant, and they’re not something you can put off. If you delay payments, you’ll be faced with hefty penalties, damage to your credit, and possible legal action. That’s why when it comes to tax debt, time can be of the essence. Let’s explore the ways you can pay tax debt quickly and get your business finances back on track.
How Long Does the ATO Give You to Pay a Tax Debt?
You’ll typically have 21 days after receiving your tax bill to pay the debt in full. In some cases, the ATO may extend deadlines if your business can show valid financial hardship. Being transparent with the ATO about your financial situation increases the chances of securing favourable terms.
Quick Action Matters: Why Pay Tax Debt Quickly?
If you don’t pay your tax on time, the ATO will automatically add a General Interest Charge (GIC) on top of what you owe. The GIC will accumulate daily as long as your debt remains unpaid.
Acting swiftly not only avoids added costs but also reduces the stress that comes with having unpaid financial obligations. The ATO looks positively on those who are proactive and willing to work with them to settle tax debts.
How to Pay Tax Debt Quickly
Here are some ways you can fast-track repaying your debt to the ATO:
1. Optimise Business Cash Flow
Managing your cash flow efficiently can help you pay tax debt quickly. You can start by closely monitoring your cash flow and identifying areas for improvement. You can also implement the following strategies:
- Cutting down on non-essential business expenses
- Offering discounts or incentives to customers for early payments
- Negotiating with suppliers to extend payment terms
- Increasing revenue through advertisements and promos
These small adjustments can make a big difference in how quickly you pay off your tax debt.
2. Use Cash Reserves (With Caution)
If you have sufficient savings, it can be a good idea to repay your tax debt in full. Doing this can help you save on interest charges and penalties. However, your cash reserves must be large enough so that you’ll still have some left after paying the ATO.
Having cash on the side is essential for businesses to survive any emergencies and shortfalls. If you think using your savings to pay for your tax debts in full will leave you short on cash, you may want to go for another strategy, like taking on a payment plan or a loan.
3. Negotiate With the ATO
The ATO is very open to working with businesses to resolve tax debt. They often allow you to negotiate depending on your situation. In some cases, you may be able to reach a compromise with the ATO. In a compromise of tax debt, the ATO may accept a lesser amount than what you owe or simply not pursue the balance of an unpaid debt.
Before the ATO considers a compromise, they will first try other actions, like a payment plan or deferring the time for payment.
4. ATO Payment Plans
Setting up a payment plan with the ATO isn’t necessarily a “quick fix” for tax debt, but the sooner you set one up, the sooner you can deal with your debt and get your business finances in order.
An ATO payment plan allows businesses to pay tax debt in instalments. With a payment plan, you can tailor payment plans according to your financial situation. While GIC still applies, setting up a payment plan can reduce the risk of additional penalties or escalating legal actions.
You can set up a payment plan through online services or a self-help phone line if you owe less than $200,000. If your debt is more than that, you will have to directly contact the ATO. Keep in mind that not everyone is eligible for a payment plan, so it’s crucial to consider other ways to quickly pay off your debt.
5. Consider Tax Debt Loans for Immediate Relief
For businesses looking to pay tax debt quickly, one of the most effective options is tax debt loans. These loans allow you to pay off your ATO debt in a lump sum. Then, you can repay the loan with interest over time, providing you breathing space to manage your finances effectively and avoid legal action by the ATO.
With tax debt loans, you can borrow anywhere from $10,000 to $50 million, with secured or unsecured options. Some common loans for paying tax debt include:
- Secured and Unsecured Loans
- Debt Consolidation Loans
- Overdraft Facilities
- Asset-based Finance
- Property Equity Loans
- Interest-Only Loans
6. Use a Personal Loan
If a tax debt loan isn’t suitable, some business owners may consider a personal loan to pay tax debt. While this can be a viable option, it’s important to weigh the pros and cons. While a personal loan can provide immediate cash, it can also put your personal financial well-being at risk, potentially affecting your ability to meet obligations (e.g., mortgage or family expenses). If you can effectively manage using personal debt to cover business obligations, then this option may be right for you.
7. Use Superannuation to Pay Off Tax Debt
In rare cases, businesses or business owners might wonder, “Can I use super to pay tax debt?” The answer is yes, you can access your super if you’re over preservation age and retired. You can also access your super early, but only under specific conditions, like severe financial hardship or terminal illness, among others.
If you’re facing severe financial hardship, you can access your super early provided that:
- You are getting income support payments continuously for 26 weeks
- You are unable to pay for essential living costs
Early withdrawal of super is a significant financial decision, as it can affect your retirement savings. Always consult with a financial expert before pursuing this option.
8. Seek Professional Advice for the Best Results
Every business’s financial situation is unique, and the most effective strategy to pay tax debt quickly varies. Consulting with a financial expert can help you explore the best options for repaying tax debt. Professional advice comes most handy if you’ve been rejected by the ATO for a payment plan. You’ll be given expert advice on other viable options, like tax debt loans.
To Wrap it Up
Dealing with tax debt can be stressful, but with the right approach, businesses can pay tax debt quickly and avoid additional complications. Whether you opt for a tax debt loan, ATO payment plan, or even consider using superannuation or personal loans, the key is to act decisively. Acting fast can help you avoid costly penalties and regain financial stability.
Disclaimer: The information in this article is general in nature and does not take into account your personal circumstances and it is not a recommendation or advice of any kind. You should always consult a professional for tax, financial planning and superannuation before making any decisions.
Pay off Tax Debt Quickly With a Tax Debt Loan
We’re experts in tax debt loans, and we’ll help you find the right financing to settle your obligations with the ATO. Reach out to us and we’ll get you the best rates and terms tailored to your situation.
