Are you struggling to pay your tax debt in full? The Australian Taxation Office (ATO) understands that sometimes life can get in the way, and paying taxes on time can be difficult. That’s why the ATO provides payment plans to help taxpayers manage their tax debt over time.

What is a Payment Plan?

A payment plan is an agreement between the taxpayer and the ATO to pay the outstanding tax debt in regular instalments over a period of time. The payment plan is tailored to the taxpayer’s individual circumstances, such as their income, expenses and other financial commitments.

Types of Payment Plans

The ATO provides several types of payment plans to suit the taxpayer’s situation, including:

• Short-term payment plans: These plans provide up to 120 days to pay the debt in full.
• Long-term payment plans: These plans provide up to 24 months to pay the debt in regular instalments.
• Large business payment plans: These plans are tailored to the specific circumstances of large businesses with an annual turnover of more than $10 million.

How to Apply for a Payment Plan

Taxpayers can apply for a payment plan through the ATO’s online services, by phone or by mail. To apply online, taxpayers need to have a myGov account linked to the ATO. They can then select the ‘Create a Payment Plan’ option and follow the prompts.

If taxpayers prefer to apply by phone or mail, they need to contact the ATO and provide details of their tax debt, income, expenses and financial situation. The ATO will then work with them to determine the most suitable payment plan.

Alternatively, if you are time poor, your accountant can apply for a payment plan on your behalf.

Benefits of Payment Plans

The ATO payment plans offer several benefits to taxpayers, including:

• Avoiding penalties and interest charges: Payment plans can help taxpayers avoid penalties and interest charges for late payment of tax debt.
• Flexibility: Payment plans can be tailored to suit the taxpayer’s financial situation, making it easier to manage their tax debt.
• Peace of mind: Payment plans provide peace of mind knowing that the tax debt is being paid off in regular instalments.

Consequences of Not Paying Tax Debt

If taxpayers fail to pay their tax debt or make arrangements to pay it, the ATO can take several actions, including:

• Issuing a garnishee notice to an employer or bank, requiring them to withhold money from the taxpayer’s income or bank account to pay the tax debt.
• Issuing a Director Penalty Notice to company directors who have unpaid company tax debts.
• Pursuing legal action to recover the debt.

If you’re struggling to pay your tax debt, don’t ignore it. The ATO payment plans provide a flexible and tailored way to manage your tax debt and avoid the consequences of not paying it. Remember, it’s important to seek advice from a qualified tax professional if you’re unsure about your situation.   Contact the team at Journey2 to help you solve your business problems with innovative and proven solutions.