An Australian Taxation Office (ATO) business payment plan is a way for small to medium-sized enterprises (SMEs) to meet their tax debt obligations. Due to the current economic climate and residual effects of Covid-19, more SMEs than ever are using payment plans to settle tax debt. If your business is experiencing poor cash flow and is struggling to meet its tax responsibilities, contact Tax Negotiators today.
What is an ATO Payment Plan?
An ATO payment plan is an agreement between you and the Australian Tax Office to pay a tax liability over time. Payment plans can be entered into by an individual, sole trader, business or registered tax agent (on behalf of their clients).
Payment plans work by breaking down the debt into smaller instalments that are made either weekly, fortnightly or monthly over a set period of time. Unlike a large, lump-sum payment, this improves cash flow and frees up working capital for growth. How long an ATO payment plan can be is determined by the type of debt and the amount owed.
Interest-Free Payment Plans
Small businesses with outstanding activity statement debt of less than $100,000 may be eligible for an interest-free payment plan. Conditionally, the debt owed must be paid by direct debit within 12 months. Alternatively, the General Interest Charge (GIC) rate will be applicable. This is a variable rate, however, and is currently about 7.0%. For more information about past and present interest rates, visit the ATO’s website here.
Do I Need an ATO Business Payment Plan?
A payment plan is an effective solution for managing cash flow, recovering from financial hardship and avoiding serious fees and penalties. By taking control of your tax and BAS debt, you prevent running the risk of more serious recovery action being taken against you, including garnishee notices, director penalty notices (DPN) or statutory demands. It’s essential to take control of your debt as these recovery tactics have the potential to make you personally liable for unpaid debt or even wind up the business.
Arranging a payment plan is also a good idea for businesses trying to obtain finance. By taking control of your debt, you become less likely to default automatically on other payment obligations and, in turn, improve your payment history and credit score.
Tax Negotiators are backed by a combined experience of over 50 years. We can negotiate a suitable plan for you, reduce BAS and tax debt and help you regain control of your finances. In addition to this, our team are experts in assisting with tax returns and lodging future activity statements.
Can Tax Debt Be Waived?
In some circumstances, you may be able to be released from your debt; however, you will have to meet the strict ATO policies to demonstrate that paying the debt would cause you serious hardship. Examples of this include if making payments were to prevent you from being able to:
- provide food
- afford basic necessities
- provide accommodation for your family.
How to Set Up a Payment Plan with the ATO
ATO payment plans can be set up online, through an automated phone service or with your registered tax agent (that’s us!). To set up a payment plan, it’s essential first to calculate how much you are able to pay. You can use the ATO online payment plan estimator on the Australian Government website to do this.
Businesses with a debt of $100,000 or less can arrange payment plans:
- online via your myGov account. To make a payment plan online, go to Online Services for Business here and select Accounts and Payments, followed by Payment Plans.
- through the ATO’s automated phone service for businesses on 13 72 26. When using the phone service, be sure to have your Tax File Number (TFN) and Australian Business Number (ABN) ready.
- through your registered tax or BAS agent.
At Tax Negotiators, our friendly team can save you the time and stress of trying to navigate the Australian Taxation Office system. We can negotiate, set up, manage and adjust your plan, including an existing payment plan, on your behalf. It’s important to employ the assistance of expert negotiators to ensure you secure a suitable plan for your business. This helps to ensure you can pay the scheduled instalments by their due date and meet your tax obligations.
Seek Professional Advice from Tax Negotiators
Regaining control of outstanding debt is a daunting task but one that businesses cannot afford to ignore. Allowing ATO debt to spiral out of control can risk serious legal action being taken against you. We make the process of arranging an ATO plan stress-free. We can take care of everything to allow you to continue focusing on the demands of your business. In addition, we can re-negotiate an existing payment plan to ensure your small business is always getting the best deal possible and you can continually meet your obligations.