FAQ: ATO Payment Plan, There For Those Times You Can't Afford To Pay Your Taxes

Not being able to pay your tax on time can be stressful, particularly if you start getting letters and phone calls from the ATO. The good news is that the ATO are usually only too happy to assist with the payment of your debt by offering you a payment plan. I am going to take a look at some frequently asked questions about what to do if you find yourself not being able to pay your taxes on time.

What can I do if I can’t pay my taxes on time?

The ATO will offer payment plans of up to 24 months if you are unable to pay your tax on time and in full.

Does the ATO charge interest on payment plans?

Yes. The ATO charges what is known as general interest charge (GIC) on all outstanding amounts, at the time of writing the application GIC rate was 8% per annum. You can find the most up to date rates here.

Is it possible to get a payment plan without interest?

In some circumstances it is possible that the ATO will remit the interest payable. To maximise your chances of being successful in your request be prepared to answer the question why you needed the payment plan in the first place, pay each instalment by the due date and keep all of your tax lodgements up to date. You will need to pay the primary debt before the ATO will consider any requests for remission.

How do I request a payment plan?

If it is the first time you have entered into a payment plan for the debt, then this can be done online through myGov/Business Portal if your debt is less than $100,000. If your debt is more than $100,000 or you are renegotiating a failed plan, you will need to call the ATO. Your tax agent can also assist.

What happens if I miss a payment?

Your payment plan will default. It then becomes much more difficult to enter into a new payment plan. The ATO will then require you to call them where they will ask why you can’t pay your debt and then you will be required to provide details on your income and expenses to prove that you can afford to maintain your new payment plan (it’s unpleasant!). If paying via BPAY, the ATO recommends that payments are made 2-3 days ahead of the due date to ensure they have cleared by the due date and your plan doesn’t default.

What details will I need to provide to enter into a new payment plan, if I default?

You will need to provide details of:

• income

  • employment

  • interest

  • rent

  • royalties

  • dividends

• expenses, such as

  • transport

  • groceries

  • gas, electricity and water bills

  • recreation and entertainment costs

  • insurance

  • financial (for example, credit cards, personal loans)

  • clothing and personal care

  • education and childcare

  • TV, phone and internet

  • minimum mortgage repayments or rent

• assets

• bank balances, creditors and debtors.

If you are in business, they may ask you to provide details of your:

• business income (over the last 3 months)

• business expenses (over the last 3 months)

• other cashflow information, such as whether

  • the business is seasonal

  • previous activity statements are a reflection of ongoing statements.

What else do I need to do to stay within the terms of my payment plan?

Aside from making each payment on time you will need to lodge and pay each new tax obligation on time and in full. Not properly maintaining your payment plan will result in it defaulting and the requirement to set up a new plan. We cannot stress enough how important it is to lodge on time and pay in full for all future obligations. Future obligations aren’t added to existing payment plans. If you find yourself unable to pay new debt on time and in full you will need to negotiate a new payment plan. Be prepared to provide the ATO with details of your capacity to pay as outlined above.

How do I determine the terms of the payment plan I need?

You really need to keep in mind that you most likely will have future tax obligations. We always recommend you set your plan up conservatively, with smaller repayments over a longer period of time. This allows you to save for your next tax obligation while maintaining your payment plan. You can always pay your tax debt off quicker, if you find you have surplus funds. You can use the ATO’s payment plan estimator to calculate the amount of your instalments, interest and term.

If you would like specific advice tailored to your business and circumstances, Accounting Heart offers affordable service packages where you can work with Sonia one-on-one to help you get your business where you want it to be. Book your FREE Discovery Call to find out more.

Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.