Currently, the Australian Taxation Office is owed a record $55 billion in unpaid taxes, mostly by small business owners, with the rest being owed by private and wealthy groups and individuals.
They are writing to all clients who have an outstanding debt to organise a repayment programme and failure to obtain an agreement will result in the disclosure of your details to the credit reporting bureau. Once this is done, obtaining future credit will prove almost impossible.
Prior to any disclosure, the ATO will issue a formal notice of intent to disclose and so it is critical you address the problem at this time to avoid the problem becoming “public knowledge”.
During Covid, we have found the tax office extremely practical and empathetic to deal with. They have approached clients’ back tax problems with a sensitive and very understanding perspective. Even with aberrations to existing repayment plans that have occurred, they are open to adjustments provided communication channels are open and genuine.
However, during March when this has not been the case, they have “upped the ante” and commenced writing to recalcitrant Directors to inform them that they will be personally liable for certain business taxes under the director penalty notice (DPN) program.
While repaying your debt can be stressful, what is important is to maintain communication with the ATO and let them know that you are aware of your obligations rather than burying your head in the sand.
The ATO is very strong on you meeting your lodgement obligations and so, it is critical to file mandatory returns and be clear about your latest net tax position.
Generally, when you have debt, general interest charges continue to apply. However, if you comply with these suggestions in an open way and make sure your lodgements are up to date, there is a strong possibility your interest and penalty cost can be reduced, and certain circumstances eliminated.
Alternatively, if your record in these areas is poor, you will receive higher penalties with little chance of interest remittance.
The ATO knows the last few years have been tough for many businesses and they want to help and collect their debts. They see the way forward with a carrot and stick as follows:
“We will provide a clear pathway for customers to re-engage, work with us and avoid escalation.” the ATO said. We recommend that you approach the ATO with a cooperative mindset and see it as an opportunity that will help you understand what the ATO can offer and avoid further, more severe penalties that may be beyond your control.
Add to the stress and cost of an unresolved tax debt the problem of losing your credit rating and it is a win-win argument to find a solution that can be satisfactory to all parties.
The same logic applies to your SGC (Staff Superannuation). The ATO has nominated directors who fail to file SGC records or pay the funds as their first and highest priority to target.