How To Avoid The Pitfalls Of Tax Debt
Tax debt is a worrisome reality that can negatively affect individuals and businesses. It refers to the amount owed to the Australian Taxation Office (ATO) for unpaid taxes, penalties, interest, or fees. And like any financial problem, tax debt can lead to pitfalls and consequences that can affect you and your business.
As such, learning to recognize these pitfalls can help you avoid additional problems with tax debt.
Pitfall #1: Interest and Penalties:
It goes without saying when you fail to pay taxes on time; you suffer accumulating interest and penalties on top of the outstanding tax debt. These additional charges can quickly escalate the debt, making paying more challenging.
Pitfall #2: Legal Action and Debt Recovery
Unpaid taxes can lead to severe consequences because the ATO has the authority to enforce legal action to recover funds due to the government. They can garnish your wages and deduct the amount due directly from your bank accounts. In extreme cases, the ATO can also initiate bankruptcy proceedings and pursue court to seize and sell your assets to recover the tax debt.
Pitfall #3: Impact on Credit
Aside from penalties and interest, the ATO can also report your tax debt information to interested credit reporting agencies, negatively impacting your credit score and making it difficult for you to secure credit in the future.
Pitfall #4: Impact on Business Operations
Tax debt can severely hamper day-to-day business operations by creating significant cash flow problems. But ATO can also enforce restrictions on the business, including withholding tax refunds and Australian Business Number (ABN) cancellation.
Pitfall #5: Mental and Emotional Impact
Unpaid tax debt can generate stress and anxiety from the fear of legal action from the ATO, financial difficulties and the uncertainty that can arise in personal and business finances.
Pitfall #6: Impact on Government Benefits
The ATO can intercept your tax refunds and other government payments to settle your outstanding tax debt. This situation can lead to financial hardships and other challenges from the loss of benefits.
Pitfall #7: Impact on Travel
The ATO can prevent you from leaving the country with a Departure Prohibition Order when you have substantial tax debts to ensure that you address outstanding obligations before travelling internationally.
Pitfall #8: Impact on Personal and Business Reputation
Unsettled tax debt will always be a black mark on your reputation, especially among customers, suppliers and investors. It can signal financial instability, creating distrust in you and your business and highlighting your inability to meet your obligations.
Now that you know the pitfalls, you only need to remember two things to avoid falling into the tax debt trap – always keeping accurate tax records and staying on top of your tax obligations.
Another way to avoid tax debt is to seek guidance from a qualified tax agent whose expertise will help you prepare tax returns, negotiate payment plans, apply for relief and remission of penalties, and explore other measures to settle the tax debt. These measures can include all available assistance programs and payment plans offered by ATO.
However, a tax debt loan will always be the fastest solution to tax debt. This loan option will allow you to fully access funds to settle your obligations. Some lenders will even allow you to secure a loan, even on bad credit issues.
Call Tiger Finance today, and we can help you escape the stress of your tax debt.
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