Do you have a BAS, IAS or superannuation payment due soon and unsure where the funds are going to come from? If so you are not alone, many businesses are unable to pay their GST and PAYG debts, as well as their superannuation debts on time.
As at the 30th June 2016, the Australian Tax Office (ATO) was owed approximately $12.5 billion by Australian small businesses.
If your business is currently faced with this situation, you are probably concerned about what action the ATO may take and what options are available to keep the ATO onside.
To assist you in managing your business tax debt, we have provided the following suggestions.
What if you can’t pay your ATO debt in full
If you are unable to pay your tax debt in full, you should immediately contact the ATO and request a payment arrangement. The ATO is usually willing to work with you if you are upfront and honest about your situation.
Again it is important to remember that you are not alone in this situation, during the 2016 financial year the ATO entered into approximately 950,000 payment plans, which is up from 750,000 in 2014.
When agreeing to a payment arrangement with the ATO make sure you can afford what’s being proposed. Furthermore all future lodgements and payments will need to be met on time, so you need to also take this into consideration. If you fail to meet an agreed payment arrangement, it will make it very difficult to re-negotiate with the ATO going forward.
Ensure that you submit your ATO lodgements on time
Regardless of whether or not you can pay your BAS, IAS or superannuation debts on time, you should still report them. All businesses should be aware of their BAS and IAS lodgement dates.
Some businesses hold off lodging their returns until they have the funds available to pay, however this practice has some serious consequences.
As introduced by the ATO in 2012, if a company fails to lodge within three months of the due date, the directors may become personally liable for the PAYG and SGC debts as well as additional penalties and interest. So it’s important to still lodge on time.
What if you have a number of outstanding lodgements or a large ATO debt
If you find yourself in this situation, it might be time to call in the experts.
If you have failed to lodge a number of returns or have a large ATO debt, you may also be hit with interest and penalty charges. In these circumstances the ATO may not be too accommodating and may choose to enforce the following:
- a Director Penalty Notice (DPN) – making the directors personally liable for the company’s PAYG or SGC debts
- a Garnishee Notice – issued to the company’s bank requiring them to pay funds to the ATO
- a Statutory Demand – giving the company 21 days to pay the debt in full, or enter a payment arrangement, otherwise the ATO may take steps to liquidate the company.
Again if you find yourself in this situation it is wise to seek professional advice. The right expert will help negotiate a workable solution with the ATO to get your business back on track. Some examples may include granting the ATO a mortgage over your personal property, or refinancing to help secure a payment arrangement.
If such an arrangement is achievable and affordable, it can be the lifeline your business needs. The alternative is a slippery slope of failing arrangements and risking ATO enforcement action and insolvency.