Do you have Tax Debt?
Do you have Tax Debt? It could be from an Income Tax Return, or a Business Activity Statement. My clients are often caught unaware for many reasons with a tax debt which requires them to pay it off. Every clients circumstances are different so there’s never just one reason why this happens. Recently I have noticed an increased focus on Tax Debts with the ATO, with recovery action happening quicker than in the past. In light of this I wanted to give some helpful tips to prevent and manage tax debts with the ATO.
- Get lodgements in on time – I know that this is my standard advice for anything – but its good advice! By getting your lodgements done on time helps give you a ‘clean’ compliance history and if tax debts do arise the ability to negotiate arrangements are often easier. It also reduces your chances of getting penalties for late lodgements.
- If you are a business owner collecting GST, get a separate bank account for your GST collected. This helps you separate these amounts and when it comes time to pay your BAS you have the money ready at hand.
- If you are a new business owner and have not paid any income tax yet, it’s a good idea to start putting aside a percentage of your income for your tax return. Start off small with 10% of every invoice you receive, and putting this aside into another bank account is also a good idea to help reduce temptation to spend it.
- Start making regular payments towards a tax debt today! I have always said making consistent payments help reduce the recovery process with the ATO. I have had several clients with large tax debts who paid regular amounts after getting into a bit of trouble. During the time of them paying off their debt I never received any recovery letters for them.
- Make an arrangement to pay. This is very important as the sooner you make an arrangement to pay the debt the easier the ATO will be to work with.
- Communication is the biggest key. Talk regularly with your Tax Agent about your debt. They can then act on your behalf with the ATO in negotiating any arrangements.
It’s important to note here that there’s help for any situation and all you need to do is ask. Don’t let yourself get too overwhelmed before asking for help. If you need any assistance at all contact me.