Australian companies are being urged to actively engage with the Australian Taxation Office (ATO) to manage their outstanding tax debt. Following legislative changes, the tax office has new powers for the recovery of company tax debts – however, they would rather not use them.
Fortunately, there are a range of support services available to assist businesses experiencing financial hardship or cash flow issues. By communicating with the ATO to negotiate debts, request a payment plan or a hardship variation, companies can avoid incurring additional fees, interest and penalties or being subject to more serious debt recovery action.
Navigating company tax obligations is undoubtedly complex and it’s not uncommon for business owners to feel overwhelmed. However, procrastination or temporary solutions ultimately only impede a business’s ability to recover from debt. Taking action at the first sign of financial stress offers the best chance at successfully managing company tax debts.
Critically, by actively communicating and demonstrating a genuine intent and ability to pay, the ATO will not employ enforcement action.
CALL TAX NEGOTIATORS TODAY!
If you are struggling to meet your tax liabilities or have received notice from the Australian Tax Office regarding an outstanding debt, contact the friendly team at Tax Negotiators today. Our highly trained and compassionate staff are the experts at tax debt negotiation. We can assess your financial situation and offer a tailored solution to deal with your debt and implement tax management strategies for the future.
Company Tax Obligations
Understanding your company’s tax obligations is the best way to prevent the accumulation of tax debt in the first place. The main tax liabilities a company is likely to be liable for include:
COMPANY INCOME TAX
From the 2021-22 financial year, companies with an aggregate turnover below $50 million are considered a ‘base rate entity’ pay tax at a rate of 25%. Companies with a turnover above this threshold pay tax at a rate of 30%.
GOODS AND SERVICES TAX (GST)
A tax of 10% that is applied to the sale of most goods or services. Registering for GST is only compulsory for companies that:
- have a total or estimated total annual GST turnover of $75,000 or more
- provide ride-sharing, taxi or similar travel services, regardless of their annual turnover
- intend to claim fuel tax credits
PAYG WITHHOLDING TAX (PAY AS YOU GO)
Companies may be required to withhold a portion of money from eligible payments for tax, including, but not limited to:
- income to employees and directors
- businesses that have not provided an Australian Business Number (ABN)
- contractors with whom you have a voluntary agreement
CAPITAL GAINS TAX (CGT)
CGT is a tax applicable to the profits received from the sale of eligible assets. Although there are a number of exceptions, for businesses, CGT is primarily applicable to the sale of real estate, shares and cryptocurrency.
FRINGE BENEFITS TAX (FBT)
A fringe benefit is a benefit given by an employer to their employee in a form other than their usual income (ie. salary or wages). The amount of FBT payable is calculated on the taxable value of the fringe benefits. Examples of fringe benefits include a business car for personal use or free ticket to a show.
WE CAN HELP!
At Tax Negotiators, we proudly support businesses to understand how much tax they are liable to pay. With our professional services, you can be confident that all your business tax obligations with the ATO have been fulfilled.
If you owe money to the ATO, there is help available even if you cannot afford to pay immediately. Taking action as soon as possible offers the best chance of successfully settling your overdue tax debts. Call our friendly team today on 1300 277 148 or email firstname.lastname@example.org.
Unpaid Company Taxes? Here’s What You Can Do
If you have business tax debts, sticking your head in the sand is not a solution. The ATO a range of tax debt recovery powers, some of which can ultimately wind-up a company or result in personal liability for directors.
What happens if you don’t pay?
ATO enforcement actions include:
When you owe money for a tax debt, the ATO may issue a garnishee notice to a third party that holds money for you or owes money to you. This notice allows the ATO to bypass you, legally ordering the company’s creditors to pay the amount related to your tax debt directly to them.
DIRECTOR PENALTY NOTICE (DPN)
A director penalty notices makes directors personally liable for their company’s unpaid tax debt. The specific tax debts DPNs relate to include:
- PAYG tax
- Goods and services tax (GST)
- Superannuation guarantee charge (SGC)
If made personally liable, director’s assets such as cash, real estate or vehicles are at risk.
DISCLOSURE OF BUSINESS TAX DEBT INFORMATION
The ATO now has the power to disclose outstanding business tax debts to credit reporting bureaus. This debt recovery strategy is designed prevent unfair advantage among businesses and encourage active communication with the ATO.
If your business tax debt information is disclosed to credit reporting agencies, it can have a negative impact on your credit rating. Consequently, it may impede your ability to secure a business loan or other business finances.
If you have a business debt of $100,000 or more that has been overdue for over 90 days, you are at risk of having your tax debt disclosed. Other criteria include:
- You hold an ABN (complying superannuation funds, charities and government entities are excluded)
- You are not actively communicating with the ATO to manage your tax debt
- You do not hold an active complaint regarding the ATO’s decision to report with the Taxation Ombudsman
DPNs relate to debt owed from income tax, fringe benefits tax, business activity statements and superannuation. A company’s debt information is removed from a CRB’s credit report once the debt is paid in full or they no longer meet disclosure criteria.
Bankruptcy is a legal declaration that a company is unable to pay all of their outstanding debts. When this occurs, a bankruptcy trustee liquidates the remaining assets in order to pay off as much debt as possible.
A bankruptcy notice initiated by the ATO requires companies to pay the money they owe within 21 days or negotiate a payment arrangement with the ATO.
If you can substantiate your ability to pay the outstanding tax debts within a reasonable period of time, the ATO will not seek to bankrupt you. It is critical to communicate with the ATO as soon as possible and provide them with the evidence supporting your ability to pay.
A statutory demand is a legal order under Section 459E of the Corporations act that provides a debtor 21 days to pay in full or enter a payment plan. If no action is taken when the 21 days expire, the debtor may be presumed insolvent and the creditor can commence proceedings to wind-up the company.
If a business fails to pay their outstanding tax debt or negotiate a payment arrangement, the ATO may petition with the court to commence wind-up action. When this occurs, a registered liquidator is appointed to sell your business’s remaining assets and pay back as many outstanding debts as possible.
Business Tax Debt Solutions
At Tax Negotiators, we pride ourselves on helping businesses to make informed decisions about solving their tax debt and managing their business finances. We can help guide your small business to the right solution, which may be:
TAX DEBT NEGOTIATION
We are experts in negotiating the principal debt amount, interest charges, fees and penalties with the ATO. Additionally, if you are struggling to pay due to exceptional circumstances such as a family tragedy or relationship breakdown, we can work to negotiate the release of your entire debt.
If you are not able to pay your whole tax bill, we can help to negotiate a payment plan. Often, the interest charged on a plan with the ATO is less than the interest rate on debt consolidation loans from other financial institutions. This can help your business to save significantly on repayments, improve cash flow and pay less over the life of the payment plan.
COMPANY DEBT RESTRUCTURING
By analysing your financials and business debt to equity ratio, we can identify aspects of your company where processes and efficiency could be improved. Then, by making careful structural and managerial changes, we can help you to increase profitability, making it easier to repay your business debt.
If a company decides they are insolvent or likely to become insolvent, they may enter voluntary administration. In this situation, an external administrator is appointed to assess the company’s viability, implement improvements to increase profitability and give the best possible return to creditors.
During liquidation, a registered liquidator is appointed to sell the company’s assets in order to repay as many creditors as possible. First funds are distributed to priority creditors, followed by remaining unsecured creditors.
Repay Your Company Tax Debts with Tax Negotiators
With the friendly team at Tax Negotiators, you can get on top of your tax debt without stress. With our expert services, you can prevent the harsh penalties and consequences that come from ignoring your debt and failing to lodge your tax return, such as:
- Receiving a director penalty notice
- The disclosure of business tax debt to credit reporting bureaus CRBS
- Garnishee Notice
- Being chased by a debt collection agency
- Interest, fees and charges
- Bankruptcy or wind-up notice
Take Action Now to Reduce Your Company Tax Debt
The ATO have made it clear that any small business failing to engage in a timely manner regarding their debt may face legal recovery action.
At Tax Negotiators, we help companies to fulfil their tax responsibilities. We can ensure your tax returns are lodged by their relevant due dates and prevent the accumulation of interest, penalties and charges. Additionally, if you already have an overdue tax bill, we can help to negotiate the debt and a suitable payment plan, avoiding legal action by the ATO.
If you are stuggling to repay your tax bills, speak with a registered tax professional today! Contact Tax Negotiators to book an initial consultation for free advice by phoning 1300 277 148 or emailing email@example.com.