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It is not uncommon for businesses or individuals to have trouble paying their tax debts at one stage or another.

To help with this, the ATO offers payment arrangements to help in paying off tax debts as they arise. These arrangements assist tax payers by allowing them to pay off their tax debt in instalments in an agreed upon timeframe. Each arrangement is tailored to a particular business for no more than 24 months, however, there are also several requirements and conditions that must be met in the arrangement.

How to Set up a Payment Arrangement:

The Payment Plan calculator can be used to work out what payment plan is right for you. Once this has been calculated, it can be used as a guide to set up a payment plan.

 

After that, how and when a payment plan can be set up depends on the level of debt held by the tax payer. If it is less than $25,000, then a payment plan can be quickly and easily set up through the ATO’s automated or online services, without needing to speak to a customer service agent. The Automated phone service numbers are:

Businesses: 13 72 26

 

Individuals: 13 28 65

 

For debts greater than $25,000 but less than $100,000 automated and online services can still be used, however the greater the debt the more difficult this becomes. For all other debts the ATO can be contacted on 13 11 42 to discuss your circumstances.

Business Eligibility:

When assessing if a businesses or individual’s eligibility for a payment arrangement, the ATO focuses on their ability to pay its debts and meet ongoing commitments. To assess this, the ATO considers various indicators including asset/liability position, gross margin and cash flow.

The ATO might also ask you other questions relating to how you intend to pay the instalments and how often you can, what have you done to avoid further debt, how the debt arose and your average monthly income and expenses.

Conditions to Payment Arrangements

Once an arrangement has been reached with the ATO there are several conditions that apply. General interest charge will accrue until the debt is paid. An interest free payment arrangement can be set up for activity statement debt, but does come with its own list of specifications. More information on these special arrangements can be found through the ATO.

 

Additionally, if any tax credits or refunds are made, they will be used to reduce your tax debt but they will not count as an instalment payment. The agreed upon instalment will still need to be made. You can, however, make additional voluntary payments to pay off your debt at any time.

You will still have your regular obligations to the ATO even if you have a payment arrangement for your debt. Activity statements and tax returns still need to be lodged on time and any associated liabilities need to be paid on time. If you fail to do this, you’ll default on the plan.

How/When to Pay

Payments to ATO can be made from your Australian cheque or savings account through a branch of your bank or using their internet banking services. Payment can also be made with a credit card online, through your myGov account for individuals and sole traders, or through Government EasyPay for businesses. All you will need is your Payment Reference Number and a Visa, Mastercard or American Express card.

When to pay will be determined by your agreed upon timeframe in the arrangement, although, as mentioned above, voluntary payments can be made at any time.

What happens if I don’t pay?

If you default on a payment in a payment arrangement, then all future payments become immediately due and payable. Defaulting on a payment also might result in the matter being referred to the ATO enforcement division and the ATO will apply its processes and procedures in pursuit of the outstanding debt, likely without any further negotiation.

Additionally, defaulting on one payment arrangement will give you a bad record with the ATO and will make any future dealings more difficult.

It is not uncommon for businesses or individuals to have trouble paying their tax debts at one stage or another.

To help with this, the ATO offers payment arrangements to help in paying off tax debts as they arise. These arrangements assist tax payers by allowing them to pay off their tax debt in instalments in an agreed upon timeframe. Each arrangement is tailored to a particular business for no more than 24 months, however, there are also several requirements and conditions that must be met in the arrangement.

How to Set up a Payment Arrangement:

The Payment Plan calculator can be used to work out what payment plan is right for you. Once this has been calculated, it can be used as a guide to set up a payment plan.

 

After that, how and when a payment plan can be set up depends on the level of debt held by the tax payer. If it is less than $25,000, then a payment plan can be quickly and easily set up through the ATO’s automated or online services, without needing to speak to a customer service agent. The Automated phone service numbers are:

Businesses: 13 72 26

 

Individuals: 13 28 65

 

For debts greater than $25,000 but less than $100,000 automated and online services can still be used, however the greater the debt the more difficult this becomes. For all other debts the ATO can be contacted on 13 11 42 to discuss your circumstances.

Business Eligibility:

When assessing if a businesses or individual’s eligibility for a payment arrangement, the ATO focuses on their ability to pay its debts and meet ongoing commitments. To assess this, the ATO considers various indicators including asset/liability position, gross margin and cash flow.

The ATO might also ask you other questions relating to how you intend to pay the instalments and how often you can, what have you done to avoid further debt, how the debt arose and your average monthly income and expenses.

Conditions to Payment Arrangements

Once an arrangement has been reached with the ATO there are several conditions that apply. General interest charge will accrue until the debt is paid. An interest free payment arrangement can be set up for activity statement debt, but does come with its own list of specifications. More information on these special arrangements can be found through the ATO.

 

Additionally, if any tax credits or refunds are made, they will be used to reduce your tax debt but they will not count as an instalment payment. The agreed upon instalment will still need to be made. You can, however, make additional voluntary payments to pay off your debt at any time.

You will still have your regular obligations to the ATO even if you have a payment arrangement for your debt. Activity statements and tax returns still need to be lodged on time and any associated liabilities need to be paid on time. If you fail to do this, you’ll default on the plan.

How/When to Pay

Payments to ATO can be made from your Australian cheque or savings account through a branch of your bank or using their internet banking services. Payment can also be made with a credit card online, through your myGov account for individuals and sole traders, or through Government EasyPay for businesses. All you will need is your Payment Reference Number and a Visa, Mastercard or American Express card.

When to pay will be determined by your agreed upon timeframe in the arrangement, although, as mentioned above, voluntary payments can be made at any time.

What happens if I don’t pay?

If you default on a payment in a payment arrangement, then all future payments become immediately due and payable. Defaulting on a payment also might result in the matter being referred to the ATO enforcement division and the ATO will apply its processes and procedures in pursuit of the outstanding debt, likely without any further negotiation.

Additionally, defaulting on one payment arrangement will give you a bad record with the ATO and will make any future dealings more difficult.

If you need any further help, Fitzpatrick Group have the professionals to tend to your specific circumstances and situations. Give us a call so we can help you sort out your debts.

 

Tyran Clare – Senior Business Manager

Tyran is a Chartered Account (CA) and a Registered Tax Agent. Tyran is also certified in Xero Accounting. She has 20 years’ experience in the accounting industry and joined Fitzpatrick Group in 2012.

Peter Carter

Need a hand with paying your tax debts? Give us a call and let us help you through it.

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