Running a business is extremely time-consuming but organising your tax payments on time should be one of your top priorities. However, if you have been let down by your customers, chasing bad debts and payments plus juggling a heavy work load, you can experience financial difficulties that means you are unable to pay off your tax debt. If this is the case there are a few simple steps that you must undertake in order to avoid penalty charges and in certain circumstances, severe punishment that could involve you being taken to court and face a prison sentence.
First of all contact the Australian Tax Office (ATO)
If you know that you are not going to be able to pay off your tax debt by the correct date, then contact the ATO. You or your income tax agents must inform the ATO so that they can work with you to make suitable arrangements to pay off the debt. They can discuss the various options with you but it might be possible for you to pay off the debt in instalments.
Negotiation for payment by instalments
This is not a new situation for the ATO as many businesses have problems from time to time with cash flow, so speak with your tax accountant as they will be able to negotiate this for you. Getting an experienced income tax professional, of which there are several in the Brisbane and Cairns area, is the best way forward as they will be used to negotiating with the ATO. They can help you prepare for the questions that the ATO will ask as to why you cannot pay the money all in one go.
Ensure all outstanding tax statements are submitted to the ATO
You and your tax accountant will need to ensure that any outstanding income tax returns, activity statements and other documents relating to your business tax, are submitted to the Tax Office. If you do need some help to catch up on your business taxes, then speak to your accountant.
Notification of the payment arrangement
If your tax accountant, or tax agent, has been able to negotiate payment in instalments, then the next step is that the ATO will send you notice of this in writing. They will also send out a set of payment slips one for each part payment and you can arrange to pay these via direct debit or credit for example.
Pay each instalment on time and in full
Your tax accountant will emphasise how important it is to make sure that you make each instalment payment with the due date and the correct amount. If you don’t then the ATO could demand all the payment in full. Your accountant will also help you to prepare an effective tax payment plan for the next income tax year and give you advice on how to manage your tax payments.
Interest payments
You also need to be aware that if you don’t pay your business tax on time, then a general interest charge will be added automatically to the amount outstanding. Again this is something that your income tax professional will highlight to you as well as the penalties that you will face should you fail to pay altogether, or miss an important tax deadline.
Remember if in doubt speak with an experienced income tax accountant in your area, and you will be sure to get all the help and advice to avoid falling into a tax debt situation.
At ITP Qld, clients can be assured they can speak to a professionally trained tax consultant about all their personal tax matters all year long so your business will be on top of its finances, without charge.
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