It’s never been more important to keep on top of your ATO obligations. The ATO have turned nasty and unforgiving and if you owe them money, expect them to want it paid sooner rather than later. This tough-guy approach extends to requests to waive penalties and interest, with almost all requests being denied.
It has never been more important to keep on top of your ATO debts.
ATO GETS TOUGH
Back in September we wrote that the ATO were cracking down on debts, and we’re seeing that in action at the moment. Aside from chasing debts earlier and with less forgiveness, the biggest change we are seeing with the ATO is that they are not remitting intererst and penalties like they have been for the past few years.
We are finding it very difficult to get the ATO to waive interest. Their view is that you should know when and how much you owe the ATO, and you not being aware is not a good enough reason for not paying. It doesn’t matter that you don’t have a MyGov account, it doesn’t matter that they ATO didn’t send you a notice of assessment for your company payable, it doesn’t matter that you changed address and didn’t get the statement – in the ATO’s eyes you have enough ways to find that info and keep on top of your ATO debt.
COMPANY TAX RETURNS
One of the biggest issues we have seen recently is people not paying their company tax because they didn’t get a Notice of Assessment from the ATO. For whatever reason, the ATO don’t send a NOA for companies, and if you try and use this as an excuse, you will be shot down very quickly.
The ATO’s position on this is that when you lodge your tax return (either yourself or via your accountant), the tax return states the amount payable, and therefore you are aware of the amount payable. Yes, the tax return doesn’t contain BPay details, but in the ATO’s eyes those details aren’t difficult to obtain if you simply log into your ATO Online Services account or give your accountant a call.
In an ideal world, we would get notifications from the ATO detailing who hasn’t paid their tax return so we can then forward an email with a reminder, but unfortunately the ATO don’t send anything like this to us. We are looking at ways that we can help you remember, manage, and pay your ATO debt, but some self-help recommendations include:
- When you sign your company tax return, take note of the amount payable and either pay it immediately or put a scheduled payment in your internet banking;
- Put a reminder in your calendar on say 31 March to pay your tax debts;
- If you are unsure of the BPay details, call us. The BPay details for income tax returns are the same every year, so if you had a payable last year, you already have those details; and
- Get access to ATO Online Services and just log in once every few months and have a look if anything has popped up.
INDIVIDUAL PAYG INSTALMENTS
Another common issue we come across is the ATO chasing unpaid PAYG Instalments where the individual has no idea they have been charged those instalments.
In the “good old days”, they mailed these via that orangy-pink paper form that told you how much to pay. Unfortunately, the ATO are now “digital by default” and if you have a MyGov account, they simply publish them to your MyGov.
No paper form, often not even an email. You are just expected to know that each quarter you have to pay the ATO something, and it’s your job to go hunting for it.
We spend around $8,000 per year on software that connects to the ATO to find notifications like these so we can send you an email when the ATO publish those PAYG Instalments – but ATO systems are far from perfect or consistent and even our expensive software doesn’t see all of them.
Until the ATO improve their systems, self-help is unfortunately the best way you can keep on top of your PAYG Instalments. Put a reminder in your calendar each quarter to log into your MyGov and have a look and see if you have a PAYG Instalment notice. If you don’t have access to MyGov, we recommend looking at our article on How To Setup MyGov, MyGovID, and ATO Online Services, and if you believe the ATO’s Instalment amount is too high, then have a read of our article on How To Vary Your PAYG Instalment.
YOUR OPTIONS IF YOU OWE THE ATO MONEY
Our first suggestion would be to call the ATO ASAP and arrange a payment arrangement. As they crack down more and more, payment arrangements will be harder and harder to get – so getting in early will give you the best chance of getting good terms.
Secondly, chat to your bank. Why pay the ATO 10% interest when you can pay the bank 6% or 7%?
Thirdly, see if you can find a way to simply pay your ATO debt. It may mean selling that rental property, re-mortaging your home, or disposing of equipment that you rarely need – but getting this debt off your books would be something worth considering.
HOW TO SEE IF YOU OWE THE ATO MONEY
Not sure if you owe the ATO money (or how much), we have a video walkthrough on how to use your MyGov account, or business online services account to see what you owe.
Simply log in to your online services account, find the accounts menu, and your various ATO account will display with the current balance of each account.
Open each account to see what transactions are contained (i.e. what tax debts there are), and payment details can be found there also.
AVOIDING GETTING IN THIS POSITION TO START WITH
The easy answer is pay the ATO when it is due. But there are many reasons why you can’t, some avoidable and some unavoidable.
We find that many individuals are being charged quarterly PAYG Instalements and they simply aren’t aware. A few years ago the ATO stopped posting these notices and instead just publish them in your MyGov account and expect you to find them. We’d love to say we have a solution to that, but realistically the only solution is to periodically check your ATO account to see if you are being sent these. We would suggest checking at the end of each quarter (March, June, September, December).
Businesses often get behind on ATO debts because they don’t plan for them and don’t put money aside as they go. Remember, 10% of all sales is GST, every payday, there is an obligation to pay the ATO PAYG Withholding (and super to employees). Let’s not forget income tax on profits too.
We have a simple but effective spreadsheet that will help you work out how much tax and super your business is liable for each year, so you can then put in place a plan to put $x per week or month aside so that they money is there when your BAS and tax return come around.
As they say, failing to plan is planning to fail.
It’s incredible the power of simple budgeting and planning. We have seen time-and-time again businesses make huge turnarounds simply by implementing a simple budget and a little self-disclipline. It’s amazing how far businesses can transform from being always behind on payments to getting in front with some simple tweaks.
If you are always chasing your tail, we suggest sitting down with your trusted advisor and seeing what strategies you can put in place.
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