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Can I pay my tax debt to the Tax Office in instalments?

The option of paying a tax debt by instalments may be available to you. Your accountant can negotiate a payment arrangement with the Australian Taxation Office. It is likely that your accountant is experienced in negotiating with the Tax Office as many businesses in Australia currently have outstanding tax debts.

The Tax Officer will often ask intricate questions to determine the payable monthly instalment amount. You will need to justify why you can’t pay the tax debt in one lump sum. The Tax Office finds reasons such as, “because I spent it the money” or “because I have a large debtors list”, to be unacceptable. 

The Tax Office isn’t a lending institution and like any business they want to receive their due payments, even if they are paid over an extended period.

Once you enter a payment arrangement it is important to pay all future tax bills, such as GST, fringe benefits tax and PAYG income tax instalments, by their due dates. The Commissioner of Taxation is reluctant renegotiate a payment plan if you fall behind with your payment arrangement.

Before you enter a payment arrangement you need to submit all outstanding activity statements, tax returns and other notices to the Tax Office. Your accountant can help you catch up on your taxes if required.

What happens next?

The Tax Office will send you notification of the payment arrangement in writing and a set of payment slips. There is one payment slip for each instalment. There are various payment options available to you such as BPAY, direct credit and direct debit. Choose the method that is easy for you and adhere strictly to the payment arrangement. A payment arrangement with the Tax Office is a serious commitment. If you fail to pay, the Tax Office will demand payment of the whole outstanding amount.

What is the best way to manage my tax payments?

Managing the payment of your taxes is an important element in cash flow management. For some business owners and investors, tax payments are seen as an unwanted toll on their bank balance, but this view is often taken when cash flow issues exist. Your accountant can calculate the payments that you will be required to make each payment cycle so that your end of year tax liability will be as close to nil as possible. You will need to keep these tax payment funds available in your bank account to pay your instalments by their due dates. Implementing an effective tax payment plan is relatively easy to develop and it will ease your concerns about your business’ tax liability.

The due date for payment is usually pre-printed on your business activity statement or notices issued by the Tax Office. It is a good tax strategy to diarise the due dates for your taxation payments and/or set reminders on your email calendar.

The Tax Office now outsources debt collecting to debt collection agencies. You, or your accountant, may have spoken with these agencies before. If you are contacted to pay the tax debts, you should do everything in your power to obtain funds to pay the tax debt. The Tax Office charges high interest rates if you fail to pay. The interest rate varies each quarter and if the interest rates are high, it can cause a tax debt to grow significantly. Any interest accrued is tax deductible but by avoiding the accumulation of a tax debt, you will steer clear of enforced payment arrangements and put your business in a stronger position.


Tax Minimisation Strategies









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