Tax time is just around the corner and the ATO has sent out a warning to businesses around the country that owe it money: the COVID-19 moratorium on debt collection has come to an end. Rest assured though, you’ve got some options.
During the early days of the pandemic, the ATO says it deliberately shifted its focus away from firmer debt collection action to help businesses that were experiencing challenges.
However, the ATO has been busy in recent months sending out almost 30,000 awareness letters for business tax debts and 52,319 awareness letters about the use of Director Penalty Notices.
“We’ve seen an encouraging response. More than 20,000 taxpayers have already responded to our awareness letters by making payments or entering into payment plans,” says ATO Deputy Commissioner Vivek Chaudhary.
What happens if you get a letter and don’t respond?
In a nutshell: nothing good.
The ATO has already issued nearly 300 intent to disclose notices and has commenced disclosing some debts to credit reporting bureaus Equifax and Creditor Watch.
The ATO is also currently issuing 30 to 40 Director Penalty Notices each day and expects that daily number to increase.
If you get one of these notices, you’re in hot water and need to act quickly.
Worst case scenario, if you don’t immediately pay back the debt, the ATO could sue you in court, which could lead to your business going into liquidation or voluntary administration.
And if you have a business loan that’s secured against your family house, that could be at risk, too.
So what are your options?
First and foremost, if you receive any correspondence from the ATO about a tax debt you should contact your registered tax professional straight away, or call the ATO to engage in a payment plan.
Mr Chaudhary says the ATO’s preferred approach is always to work with taxpayers to resolve their situation through engagement rather than enforcement.
“We understand that a lot of people – especially small businesses – have done it tough through COVID and may now have a tax debt,” says Mr Chaudhary.
“But don’t stick your head in the sand. Even if you can’t pay the full amount owed straight away, please contact us or your registered tax professional to discuss and we will work with you to set up an appropriate payment arrangement.”
That said, not everyone enjoys the ATO hovering over their shoulder waiting for them to pay off a large tax debt.
If you’re one of those people, feel free to get in touch with us to explore some of your other options with business loan lenders.
The SME lending space is growing each month, with a surge of new lenders and products recently hitting the market – some of which offer flexible repayment options.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.