In the wake of recent economic conditions, Australian businesses are grappling with unprecedented levels of paying off tax debts. Consequently, there has been a surge in payment plans and the Australian Taxation Office (ATO) is ramping up enforcement action against business owners. In their article prioritising debt collection efforts the ATO spelled out that action can include “garnishees, recovery of director penalties, disclosure of business tax debts, and legal actions including summons, creditors petition, wind-up and insolvency action.”
Tax debt loans offer a lifeline to clear outstanding ATO obligations, prevent enforcement action, and avoiding further penalties. This article provides more details relating to the various types of business loan solutions available for paying off tax debts and their respective application processes for tax debt relief.
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. 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 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.
Navigating ATO Payment Plans and Enforcement Actions
Understanding ATO payment plans and enforcement actions is crucial for businesses to keep liabilities contained within their business and minimise the severe outcomes from failing to engage with the ATO over outstanding tax debt. Directors Penalty Notices may be issued if the business fails to meet its tax obligations, potentially putting company directors at risk.
In the event that outstanding tax debt is only one potential creditor issue, the loans listed above can be utilised for broader debt consolidation, as well as dealing with ATO debt problems.
Finding the Right Solution for Your Business
Amid challenging economic conditions, Australian businesses are facing increased tax debt, leading to a surge in payment plans and heightened enforcement action by the ATO. To mitigate these issues, various types of business loan solutions can be utilized to pay off tax debt, including overdrafts, unsecured business loans, equipment finance, private lending, and second mortgages.
Each option offers different advantages and application processes tailored to the needs of business owners with various financial situations and credit histories. It is crucial for businesses to understand ATO payment plans, enforcement actions, and tax debt consolidation to make informed decisions and successfully manage their tax debt. By carefully evaluating their options and leveraging the most suitable loan solutions, business owners can bridge the financial gap, tackle their finances with tax debt loans, and secure a brighter financial future that provides tax relief.
For assistance with your tax debt loans contact us here.
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