In the world of Australian business tax is a constant companion, and we should all be aware of our obligations to the Australian Tax Office (ATO). As business owners, it’s crucial to maintain a healthy relationship with the ATO, and the cornerstone of this relationship lies in managing your ATO tax debt. Tax debt is not just another business obligation, but a critical aspect that can significantly influence your business’s financial health and its future trajectory.
Though it can sometimes seem daunting, especially during challenging economic times, paying back taxes shouldn’t have to be an insurmountable task.
In recent times, we’ve seen an increase in the number of businesses entering into ATO payment plans due to the unprecedented levels of outstanding tax debt. But whilst an important tool to help manage your tax obligations, a payment plan with the ATO isn’t always the end of your tax debt as many business owners will know.
Keeping in mind the consequences of not staying up to date with your tax debt we’ll look at ATO debt help strategies, seek to answer some common tax debt questions and look at the role loans for ATO debt can play to provide tax debt relief.
Understanding ATO Enforcement Action
Navigating tax debt begins with understanding the potential implications of not meeting your tax obligations. The ATO has various mechanisms at its disposal, which it can employ if you do not meet your tax obligations.
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 just to their banks but if you’ve provided the ATO an Accounts Receivable report as part of their payment process, you’ve given the ATO your customer list and opened your customers to receiving a garnishee notice for your tax debt. If you value your reputation and good standing with your customers, the last thing you want is for them to receive a garnishee notice for your tax debt.
Director Penalty Notice (DPN)
Another tool is the Directors Penalty Notice (DPN), which allows the ATO to recover a company’s unpaid tax and can make Directors personally responsible for company obligations.
Disclosure of Business Tax Debts
The ATO can also disclose business tax debts to credit reporting agencies like Equifax and CreditorWatch, which could impact your business’s credit rating, potentially influencing your future borrowing capacity.
Statutory Demands for Payment
Statutory Demands for payments can be issued requiring a company to pay its entire debt or enter into a payment plan the ATO deems acceptable. If a company does not comply with a statutory demand this may be deemed evidence the company is insolvent and the ATO could move to wind up a company. If a court orders your company to be wound up a liquidator will be appointed to sell the company assets. The ATO is the most active creditor pursuing wind up notices in Australia.
Proactive Strategies for Managing ATO Debt
When it comes to managing tax debt, a proactive approach can make a world of difference. Here are a few strategies that can help with tax debt relief .
Prioritise Your Tax Debt
It’s not an exaggeration to say make your tax debt a priority or the ATO will make you a priority. Like any problem, you can’t stick your head in the sand with tax debt and expect it to have tax debt relief. The ATO will generally work with you and will seek to enter into a payment plan for your outstanding debt but if you avoid contact the tax office is less likely to deal with you in a favourable manner and is more likely to move to enforcement action for paying back taxes.
Lodge BAS and Returns on Time
If you’re on a payment plan and struggling to keep up to date you may be tempted to delay lodging as a way of not falling further behind. But, as the ATO talks about in their summary on payment plans, failing to keep up to date with new tax instalments can also cause you to default on your payment plan and may bring unwanted enforcement action. By lodging your BAS and returns on time you’re executing a strategy that avoids additional penalties.
Tax Debt Loans: Loans To Keep The ATO At Bay
Tax debt loans can serve as an effective tool to manage outstanding ATO obligations. These loan solutions aren’t a last resort, but rather a constructive strategy to prevent further penalties and enforcement action. The main reasons why business owners use a loan to pay out their tax debt is to avoid receiving a Director’s Penalty Notice, access longer payment terms and to clear debt so they can access lending from major banks.
Unsecured Term Loans
Unsecured term loans (including unsecured overdrafts) include options for those with perfect credit history as well as those with bad credit and business owners somewhere in between. The loan doesn’t require property security and can be funded the same day as you make the application. An unsecured loan application process is usually a no-doc application relying on bank statement analysis to generate approvals.
Private lending is another option that can provide quick and flexible financing solutions. Comprising first mortgages, second mortgages, and caveat loans, this approach doesn’t involve credit scoring. For this reason it can be a reliable option for business owners with bad credit who are seeking a genuine low-doc loan solution.
Talk To A Tax Debt Loan Expert
Navigating your tax debt is an integral part of your business journey. Different loan solutions to pay off tax debt are a useful tool for business owners seeking relief from onerous payment plans and avoid enforcement action from the ATO.
To talk to an expert about tax debt loan solutions to cover your outstanding ATO debts and business tax debt advice contact us here.
Disclaimer: Please note that the information provided in this article is opinion only and should not be construed as financial, tax or investment advice or relied upon for any purpose.
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