For startups and small businesses, receiving a demand related to tax debt from the Australian Taxation Office (ATO) can be a significant concern. Understanding how to respond effectively is crucial for maintaining financial health and compliance. Here’s a quick guide on what you can do when the ATO sends your company a tax debt notice.
Key Takeaways of What to Do When Facing a Business Tax Debt
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What You Should Know About ATO’s Tax Debt Notice
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The ATO targets businesses with substantial overdue tax debts for reporting to CRBs. Businesses with over $100,000 in tax debt overdue (over 90 days) risk having their debt reported, affecting their credit rating.
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Immediate Steps to Take After Receiving a Notice
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Review the debt for accuracy, engage with the ATO for potential solutions, and seek professional advice to address the tax debt effectively.
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The Importance of Engaging with the ATO
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Proactive engagement with the ATO can prevent tax debt reporting to CRBs, safeguarding your business’s credit rating and borrowing capacity as well as mitigate against further enforcement action.
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Exploring Financing Options: Tax Debt Loans
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Tax debt loans, ranging from $10k to $50M, are available for various tax obligations and can be a flexible, cost-effective alternative compared to ATO payment plans.
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Long-Term Strategies for Tax Debt Management
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Effective financial management and regular tax planning with an accountant are crucial for preventing future tax debt accumulation.
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What You Should Know About ATO’s Tax Debt Notice
The ATO’s Disclosure of Business Tax Debts program targets businesses with substantial overdue tax debts. If your business has an Australian Business Number (ABN), owes more than $100,000 in tax that’s overdue by over 90 days, and isn’t actively engaging with the ATO to manage this debt, it may be reported to credit reporting bureaus (CRBs). The ATO articulates this policy aims to level the playing field by addressing an unfair advantage gained by businesses not meeting their tax obligations.
Immediate Steps to Take After Receiving a Notice
Upon receiving a tax debt notice from the ATO, it’s essential to take immediate action:
- Review and Verify the Debt: Ensure the details of the business tax debt are accurate. Mistakes can occur, so confirm the specifics of what’s owed.
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Engage with the ATO: Open communication with the ATO is critical. If you’re facing challenges in repaying the debt, discuss your situation with them. The ATO may offer a tax debt payment plan or other solutions to help you.
- Consider the Tax Penalty Amnesty Scheme: For small businesses with an annual turnover of less than $10 million, the tax penalty amnesty program could waive failure-to-lodge penalties on certain payments. This scheme aims to encourage small businesses to re-engage with the tax system.
- Seek Professional Advice: Consulting with a tax advisor or financial expert can provide clarity and guidance on the best course of action. They can assist in negotiating with the ATO and exploring all available options.
The Importance of Engaging with the ATO
When you engage with the ATO, your business tax debt will not be likely reported to CRBs, even if it amounts to $100,000 or more. Doing so helps keep your business tax debt from affecting your company’s credit rating and borrowing capacity.
Engage proactively with ATO even if you face difficulties settling your tax obligations. The ATO may work with you to establish a manageable payment plan, allowing you to address your debt gradually. This proactive engagement demonstrates your commitment to resolving the debt and can prevent the ATO from taking further action.
Exploring Financing Options: Tax Debt Loans
Tax debt loans are a viable solution for managing and paying off ATO debts. Contrary to what some may believe, obtaining a loan to pay off tax debt is possible and often utilised. Specialist lenders outside of major banks are willing to fund loans for this purpose. These loans can range from $10k to $50M and are available for various tax obligations like GST, PAYG and Superannuation. They come in both unsecured and secured forms, with interest-only options available. Tax debt loans can be more flexible and cost-effective than entering into a payment plan with the ATO, especially for startups and established businesses, even those with bad credit.
Long-Term Strategies for Tax Debt Management
Long-term management of tax debt involves more than just addressing the immediate debt. It also includes planning and implementing effective financial management practices to prevent future tax debt accumulation. Regular tax planning with an accountant can prepare your company for future tax liabilities, ensuring you have the necessary funds for upcoming tax payments. Additionally, exploring various financing options like unsecured loans or capital raising against equipment can provide the necessary funds to manage tax obligations.
Let Dark Horse Financial Help You
If you’re facing the challenge of managing business tax debt, Dark Horse Financial is here to provide the support and solutions you need. Whether you’re looking for a tax debt loan or require strategic financing options for long-term financial management, we have the expertise, network of lenders and resources to assist you. Our range of financing options, including both secured and unsecured loans, are designed to offer you the flexibility and support you need to overcome your tax.
Get in touch and take the first step towards resolving your business tax debt.
darkhorsefinancial.com.au neither provides tax advice nor is this page intended to provide advice of any kind. This page is intended to summarise general information only that is available in the public domain. The information on this page is subject to change and should not be relied upon for any reason or purpose.
You should always consult a professional before making any decisions that could impact you or your business or relate to tax information.
