How to stay on top of your tax debt as a business owner

Mention the words Australian Taxation Office (ATO) or tax debt to any business owner in Australia and one of two things happen:

1. You feel calm about dealing with the ATO because your bookkeeper and accountant handle it all for you, and you have your tax debts and payments under control.
2. It sends a shiver up your spine and you automatically feel stressed knowing you don’t have the money for your next BAS payment and your tax debt feels out of control.

There are more than 2.5 million businesses operating in Australia, according to the Australian Bureau of Statistics.

It’s estimated that 70,000 have a significant ATO tax debt and one-in-five has a payment plan arrangement in place with the tax office. 

If you are struggling to meet your tax obligations, you are not alone. 

At Accounts all Sorted, we work with hundreds of business owners and many feel the same way, stressed and anxious about their taxation and BAS obligations, and tax debt.

Running a business can be stressful enough without adding the ATO into the mix. That’s where Accounts All Sorted can help take away the pressure and guide you down the right path, so you can feel confident and calm when it comes to your BAS, super, PAYG obligations and tax debt.

In this blog, you’ll learn how to avoid an ATO debt, how to meet your tax obligations without feeling stressed and ways to pay back your debt if you do owe the ATO. 

Struggling to meet your ATO requirements? Here’s what to do:

• Get in touch: If you are struggling to meet your ATO requirements, the best thing you can do is contact the taxation office. It might feel daunting, but contrary to popular belief, the ATO wants to help you get on top of your obligations, pay your BAS and tax on time, and assist in paying your tax debts if you have them. If you don’t feel comfortable contacting the ATO yourself, talk with your bookkeeper and have them do it on your behalf. 
• Get a payment plan in place: If you can’t pay on time, there are support options for business owners, which your bookkeeper can help with. If you are struggling to meet your tax and super obligations, it’s nothing to be ashamed of, in fact, in 2019, one in five businesses had entered into a payment arrangement with the ATO.

The ATO has several arrangements for businesses who can’t pay their tax obligations, including payment plans, deferral of payments and/or release from payment in some cases. The sooner you have a plan and arrangement in place with the ATO, the better the outcome will be, and the less stressed you will start to feel.

• Get help from a professional: At some stage every business owner has felt the pinch when it comes to their ATO obligations, including tax, BAS, super and paying back a tax debt. If you are struggling to meet your ATO requirements, you don’t have to go it alone. A qualified and registered BAS agent can help you get on top of your tax and super, so you can feel calm and confident knowing it’s under control.

What happens if you don’t pay your ATO requirements?

As a business owner, there are a multitude of things that can get in the way of you paying your tax obligations, including cash flow.

If you don’t pay the ATO on time you risk interest, penalties, disclosing debt information to credit reporting agencies, and in some cases legal action.

The best advice we have for businesses is to still lodge your activity statements and tax returns on time, even if you can’t pay by the due date, and stay in touch with your bookkeeping professional or the ATO itself.

We will have a better outcome and be able to work out an arrangement for you if you do.

Ways to avoid ATO debt

Of course, in a perfect world, we wouldn’t have tax debt, you would have good cash flow and sales, and everything would be paid on time. But running a small business isn’t always an easy task.

Here are 4 things you can do to avoid ATO debt in the future:

1. Increase your knowledge:  The more you understand about your books, for example, your expenses, deductions and income, the better equipped you’ll be to avoid a tax debt. 
2. Pre-plan: The ultimate way to avoid tax debt is to pre-plan. Use that new knowledge you have to your advantage and work with your bookkeeper to devise a plan so when your tax, BAS and super are due you have the means to pay them on time.
3. Put money aside for BAS and tax time: This may seem simple, but can easily be overlooked when you are busy running your business. The simplest way is to open an account and put a minimum of 15 per cent of your earnings into that account each time you are paid. 
4. Work with a professional: When you have a bookkeeper, like Accounts All Sorted, on your team, they can keep you updated on how you are tracking and work with you to get a plan in place to avoid a tax debt or at least pay your tax debt down. The easiest way to do this is to have a bookkeeper managing your day-to-day activities for you. 

How a bookkeeper can help manage your ATO liabilities

In November 2022, the ATO announced it would be actively pursuing the recovery of billions of dollars of outstanding tax liabilities, after easing off businesses during Covid.

At present, there are more than 70,000 businesses with significant outstanding tax debts. If this is you or someone you know, Accounts All Sorted can help.

We can help you understand your options and work with the ATO on your behalf to get a plan and payment arrangement in place.

We can then work with you on your business strategies, cash flow and expenses to devise a future plan to pay down any tax you owe and get set up to pay your tax, BAS and super on time.

Work with us to get on top of your tax obligations

Although dealing with ATO debts can be stressful and isn’t always easy, it can be done with the right help.

Even if you have tax debt, there are still options available to you, whether it’s a lump sum payment, hardship relief, or a payment plan, Accounts All Sorted can help get you on the right path. Contact us today and let’s explore your options.

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