Tax Debt Relief: How Bridging Loans Can Help

The Growing Burden of Tax Debt on Australian Businesses

Australian businesses are carrying more tax debt than ever before, with the Australian Taxation Office (ATO) exercising more enforcement powers to collect outstanding debts. More business owners have entered into ATO payment plans to manage their debts, but sometimes these plans are not enough to prevent enforcement action.

Get a tax debt loan to clear your ATO debt.

Understanding ATO Enforcement Action and Its Consequences

The ATO has broad powers to enforce collection of tax debt and several serious actions it can take against business owners, including:

Garnishee Notices

A garnishee notice can be issued to a person or a business that holds money for you or may hold money for you in the future. 

Commonly, people may think this applies only to their bank, but if you’ve provided the ATO an Accounts Receivable report as part of your payment plan process, you’ve given the tax office your customer list and opened your customers to the possibility of receiving a garnishee notice for your tax debt.

Director Penalty Notices (DPN)

A Director Penalty Notice allows the ATO to recover a company’s unpaid tax and can make directors personally liable for company obligations.

Disclosure of Business Tax Debts

Disclosure of business tax debts to credit reporting agencies such as CreditorWatch and Equifax, who have data agreements with the ATO, is akin to a default from the tax office listed on your credit file, negatively impacting future credit and making it harder to secure loans to pay off tax debt.

Legal Actions

Legal actions can include summons, creditors petitions, wind-up, and insolvency action. Statutory demands for payments can be issued, requiring a company to pay its entire debt or enter into an ATO payment plan. If a company does not comply, it may be deemed insolvent and face wind-up proceedings. The ATO is the most active creditor pursuing wind-up notices in Australia.

Bridging Finance: A Fast Solution for Tax Debt Relief

Tax debt loans can be used to clear outstanding ATO obligations and prevent enforcement action and further penalties. In particular, bridging finance or bridging loans can be a fast solution when businesses need to raise capital to clear ATO debt quickly.

Unsecured Term Loans

Unsecured term loans, including unsecured overdrafts and options for those with bad credit, can be funded the same day. The application process is usually a no-doc application, relying on bank statement analysis to generate approvals. This makes unsecured term loans a viable option for businesses looking for a loan to pay tax debt for tax relief.

Private Lending

Private lending options, such as first mortgages, second mortgages, and caveat loans, are genuine no-doc loan options for paying out ATO debt. The application process doesn’t have a credit score, which means loans can be settled faster than traditional bank lending.

How Bridging Finance Can Improve Your Financial Situation

The key feature of these bridging loan options is their ability to be settled quickly, clearing tax debt and preventing ATO enforcement actions. Once the ATO debt has been dealt with, this clears the way for bank lending and a debt consolidation loan with a much lower interest rate, making the situation more manageable and less stressful.

Additional Benefits of Bridging Finance for Tax Debt Relief

Bridging finance offers several other benefits for businesses struggling with tax debt, making it an attractive option for those seeking tax relief. Here are some key advantages:

Longer Repayment Timeframes

One significant benefit of bridging finance is that it can provide a longer repayment time frame than the ATO might allow, even on the most generous payment plans. This extended timeframe can ease the financial burden on businesses and allow them to manage their cash flow more effectively while repaying the debt.

Flexibility in Loan Terms

Bridging finance often comes with more flexible loan terms compared to traditional bank loans. This flexibility can be advantageous for businesses, as it allows them to tailor the loan to their specific needs and financial situation.

Lower Monthly Payments

By extending the repayment period, bridging finance can reduce the monthly payment amounts, making it more manageable for businesses to meet their obligations. Lower monthly payments can be particularly beneficial for businesses experiencing cash flow issues or seasonal fluctuations in revenue.

Preserving Business Relationships

When businesses opt for a bridging loan to pay off their tax debt, they can avoid the embarrassment and potential damage to their reputation caused by ATO enforcement actions such as garnishee notices or winding up proceedings. By settling debt quickly and discreetly, businesses can maintain their professional relationships and continue operating without disruption.

Improved Credit Standing

By using bridging finance to pay off tax debt, businesses can prevent ATO penalties from negatively impacting their credit score. In the long run, this can help businesses secure better loan terms and interest rates when they need to borrow money in the future.

Consolidate Multiple Debts with Bridging Loans

Another advantage of bridging finance is the ability to consolidate multiple debts, including tax debt, into a single loan. This can simplify the repayment process and provide additional benefits for businesses.

By consolidating various debts businesses can focus on a single loan with a clear repayment plan instead of keeping track of multiple repayment schedules, interest rates, and due dates.

Depending on the interest rates of the original debts, consolidating them into a bridging loan might result in lower overall interest costs. This has the benefit of improving cash flow by reducing the overall monthly repayment amounts. This can be particularly beneficial for businesses that are experiencing cash flow constraints or facing financial difficulties.

Get Help With Your Tax Debt Loan Solution

Bridging finance is a valid tax debt loan to deal with outstanding ATO obligations and help you avoid the ATO’s potential enforcement actions.

Benefits of bridging finance include longer repayment timeframes, flexible loan terms, lower monthly payments, preserving business relationships, and improved credit standing. 

For business tax debt advice and to get help clearing your ATO obligations and prevent enforcement action contact us here.

Disclaimer: This article is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, accounting or any other form of advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.