1300 529 603

Toll Free Number

1300 529 603

Toll Free Number

Tax Debt And How You Can Deal With It

Tax debt will always be problematic for individuals and businesses alike. If left unsettled, this tax obligation can lead to penalties, increased debt through interest fees and even legal consequences. But despite its potential severity, you can easily and quickly resolve a tax debt by taking the proper steps.

As the saying goes, the first step we need to do to address a problem is to accept and understand the problem. This article aims to shed light on tax debt and provide practical strategies to deal with it effectively.

What Is Tax Debt?

The Australian Taxation Office (ATO) levies various taxes, which include income tax, Goods and Services Tax (GST), fringe benefits tax and more on individuals and businesses. Tax debt refers to the outstanding amount of taxes owed to the ATO, typically arising from the following reasons: underpayment, late payment or failure to lodge a tax return. When this happens, the ATO issues a tax bill to the individual or business to inform them of their tax debt.

Tax debt is okay if it is dealt with as soon as possible. It only becomes a problem when the debt remains outstanding, and penalties and interest payments accumulate to exacerbate the financial burden on taxpayers. This situation typically arises when the individual or business needs more funds to settle the debt immediately.

6 Steps On How To Deal With Tax Debt

Step 1: Contact The ATO

One must proactively communicate with the ATO, especially if they need more time to pay their tax debt. The ATO offers various options, such as payment plans, remission of penalties and deferred payment arrangements, to help ease the burden.

Step 2: Negotiate Payment Plan

The ATO may consider individual circumstances and financial capability when determining a payment plan and spread the tax debt over manageable instalments. Once set, the taxpayer must stick to regular payments to demonstrate to the ATO their commitment to clear the obligation to avoid further enforcement actions of penalties. 

Step 3: Get Expert Assistance

It is always a good idea to seek expert advice from a qualified tax professional or agent. These tax specialists are well-versed in the intricacies of tax laws and will be able to help you navigate your tax issue and negotiate with the ATO on your behalf.

Step 4: Request Remission of Penalties

As part of negotiations, you can appeal to the ATO to remit penalties levied on top of your tax debt if you demonstrate reasonable cause for your non-compliance. It can be helpful to be transparent with your situation to increase your chances of penalty remissions. Ask your tax consultant about the best way to go about this.

Step 5. Explore Debt Release Programs

The ATO may also offer a debt release program to certain eligible taxpayers to have their tax debt reduced or written off in certain circumstances. Eligibility for this program depends on specific criteria, including financial hardship and inability to pay. Ask your tax consultant about this.

Step 6. Access Tax Debt Loans

Paying the ATO in full can quickly eliminate tax debt. Banks and non-traditional private lenders have available business loan products that can quickly address your needs and remove the worries of tax debt. This loan option is crucial when short on funds to settle the tax debt immediately. Some lenders may extend this financial lifeline to you even if you have bad credit issues.

Proactively Solve The Problem

Like any challenging financial situation, a proactive and responsible solution will remove the worries that come with tax debt. As a taxpayer, you should always know that you have options to explore that extricate you from this situation. You must engage the ATO, tax specialists and lenders to find the practical solution to settle your tax arrears quickly.

Note: The information in this article does not constitute professional tax advice. It is always best to consult with a registered tax practitioner or the Australian Taxation Office to evaluate your unique tax situation.

Find MOre Information