Receiving a tax bill is one thing. Realising you don’t have enough available cash to pay it by the due date is quite another. If that happens, speaking with Hills Accounting, the Tax Accountant Hobart trusts, can help you understand your options before the problem becomes more difficult to manage.
For individuals and small businesses around Hobart, an unexpected tax debt can put real pressure on the household or business budget. The important thing is not to ignore it.
If you’re unable to pay an Australian Taxation Office debt in full and on time, a payment plan may allow you to pay what you owe in manageable instalments.
What is an ATO payment plan?
An ATO payment plan is an arrangement that allows an eligible taxpayer to pay an outstanding tax debt over a period of time rather than making one large payment.
Depending on your circumstances, you may be able to set up a payment plan yourself through the ATO’s online services. In other situations, particularly where the debt is larger or your financial circumstances are more complicated, it can be worth speaking with your accountant first.
At Hills Accounting, we regularly help Tasmanian individuals and businesses understand their tax position and the options available when paying a tax debt becomes difficult.
Further information from the ATO
The Australian Taxation Office provides detailed information for people and businesses who are having difficulty paying a tax debt, including information about payment plans, available support and what to do if you cannot pay on time.
For current information directly from the ATO, visit: ATO – Help with paying
Does a payment plan stop interest?
This is an important point: a payment plan doesn’t necessarily make the additional costs disappear.
General interest charge (GIC) can continue to accrue on unpaid tax debts, including amounts being paid through a payment plan. That means it generally makes sense to pay the debt as quickly as you can reasonably afford rather than automatically choosing the longest repayment period available.
The ATO also expects payments under an agreed plan to be made on time and future tax obligations to be kept up to date.
MOST IMPORTANT: Don’t wait until the problem gets bigger
It can be tempting to put a tax bill aside when there simply isn’t enough money available to pay it. Unfortunately, doing nothing rarely improves the situation.
If you know you’re going to have difficulty paying, dealing with it early gives you an opportunity to understand the amount you owe, consider your cash flow and investigate what arrangements may be available.
For a small business, this can be particularly important. A repayment amount that looks manageable on paper still needs to work alongside wages, suppliers, rent and the other costs of keeping the business running.
How much can you realistically afford?
Before agreeing to a payment plan, it is worth looking carefully at your finances.
The aim isn’t simply to find the largest instalment you can possibly squeeze out of this month’s budget. It is to establish a repayment arrangement you have a reasonable chance of maintaining while continuing to meet your other financial commitments.
This is one area where talking to your accountant can help. Looking at the numbers before making an arrangement may prevent you from committing to repayments that become difficult to maintain a few months down the track.
Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs.
For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.
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