Tax Debt: It's Time for Some Tax Assistance

Posted by Sean Urquhart on September 21st, 2015

It has become more common for individuals and small businesses to incur tax debt due to the down turn in the economy. What is important is to ensure that you keep all your tax obligations (including lodgement) up to date. The first step is to ensure your tax returns and activity statements have been lodged in a timely manner. The next is dealing with the Australian Tax Office.

Once the quantum of tax debt is ascertained it is then necessary to contact to the Australian Tax Office and try and enter into a payment plan. Subject to the dollar amount, the Tax Office will generally oblige with small payment plans spanning no more than 12 months. The large the tax debt the harder it is to negotiate with the Tax Office. Usually, the Tax Office will require detailed financial statements to show you have the capacity to repay the debt. In addition, they may request evidence that you have sought external funding from banks/credit unions. The Tax Office prefers not to act as a bank of last resort.

The Tax Office is a business unit of the Government and collect debt on behalf of them. If they are having difficulty with collecting tax they will usually refer the debt to a collection agency. The collection agency will then chase you on behalf of the Tax Office.

Some tips with respect to Tax Debt:

• Lodgement – Ensure that you lodge all your outstanding tax returns and activity statements prior to negotiating debt. The Tax Office will generally not enter into a payment plan unless you are up to date.

• Default – defaulting on lodgement or payment will cause your payment arrangement to also default. The Tax Office will usually demand full payment of the entire debt at this point.

• Director Liabilities – a company director can be personally liable for outstanding superannuation guarantee and pay as you go withholding. Therefore, ensure your company is complying as required.

• Tax Debt – takes on many forms. Whether it is company tax, personal tax, GST or PAYGW, keeping your tax matters up to date is the first step to ensure you will not be on the wrong side of the Tax Office.

• Records – ensure you keep your accounting records up to date so there are no nasty surprises. Cloud based bookkeeping software such as MYOB and Xero allow small business owners to regularly monitor their accounting date.

• General Interest Charge (GIC) remission – once you have paid back your debt, you should request the ATO remit all or part of the general interest charge. There is no harm in asking and you may be pleasantly surprised. Don’t forget than general interest charge may be tax deductible.

• Get tax advice – if you need taxation advice, don’t guess your position, get in contact with a registered tax agent. You are no doubt not the first to be in this position and definitely won’t be the last.

If you struggle with tax debt or are not sure whether you have lodged all your tax obligations to date, it is high time to seek tax assistance from a reliable accounting firm. Whatever taxation and financial audit issues you may have, a reputable tax firm can help connect you with experienced member accountants who can help you with any area of taxation you may have problems with, ranging from audit and assurance to tax advisory, year-end tax planning, business tax, financial planning, and even IT control solutions, which can help boost your financial management, whether for personal or business gain.

About the author:

Sean Urquhart is a Tax Partner at Nexia Australia a mid-tier accounting firm located in the Sydney CBD. He has many years of tax experience helping individuals and small medium enterprises. If you have a tax debt or taxation matter that you require assistance with please contact him on (612) 82640755 or visit Tax.Help.