What to do if you have a tax debt
Many people don’t know what to do if they incur a tax debt. It can be a scary thought, and people aren’t sure of the process involved.
Common questions we get are: How do you contact the ATO about a tax debt? Can an individual contact the ATO or do you have to go through an accountant? Do you have to pay lump sum or can you pay instalments? How do I know tax debt communications aren’t a scam?
Dealing with the ATO is a very common part of our job at Aintree Group. We can spend up to four hours in a week negotiating tax debts back and forth on a client’s behalf. While it does come with challenges, it brings so many benefits to our clients that wouldn’t be as easy to access if they were to try and tackle the ATO on their own.
We want to give business owners a behind-the-scenes look into dealing with the ATO from a tax agent’s perspective; so you can understand the process, why we do what we do, and also how you can make the process easier.
When would a tax agent contact the ATO on your behalf?
When a client has a debt with the ATO and can’t pay in a lump sum, we can contact them to try and arrange a payment plan, or an extension on paying back a debt.
We can even handle the situation if you have been threatened with legal action, we can set up a payment plan of 12-24 months, depending on the size of the debt.
Why go through a tax agent instead of dealing with the ATO yourself?
As tax agents, we are prepared for their questions and how to handle negotiations if things take a tricky turn. We are better equipped to organise payment plans and extensions for paying back debts, and can negotiate based on knowing what you can and can’t afford.
As your accountant, we know your business situation, and we know how the ATO operates, so we are the perfect middle-man to find that happy medium between the demands of both.
Why it’s important to stay on top of your debts…
The biggest challenge associated with dealing with the ATO, from a tax agent’s perspective, is when the client has had previous issues with paying back debts, which the ATO has on record.
If a client has had payment plans in the past but they defaulted on them by not paying, they’re considered a risk and it becomes difficult to organise a payment plan or extension. If a client gets to eight defaults it’s even more difficult to negotiate with the ATO; they start to ask for more detailed information on the client, and the ins and outs of the business.
General do’s and don’ts:
| DO | DON’T |
|---|---|
| Interact early and make a good first impression. Stick to the point, do not volunteer too much information or go off on irrelevant tangents. Match your responses to the ATO’s scripted material. Use your accountant’s experience and expertise, and let them negotiate on your behalf. Be mindful of scams trying to get personal information by pretending to be the ATO. | Delay or ignore the ATO’s request for your response regarding a tax debt. Think the ATO will be less harsh because of difficult circumstances. Give your Tax File Number or bank details via email or over the phone to someone claiming to be from the ATO. |
Our top tip:
Shane McKenna, Director of Aintree Group
“Be open and transparent. If you think you’re going to struggle for any reason, communicate with your tax advisor early on, so negotiations can start before the due date. That gives far more flexibility with the ATO, compared to if you leave it until after the due date has passed.”
If you think you might need to organise a payment plan, or are struggling with your payments, get in touch!
