The ATO is pursuing covid-period tax debts and you could get a demand for payment that you’re not expecting. Be on the front foot, says chartered accountant GAIL FREEMAN.

Do you have a tax debt? Have you made an arrangement to pay it off? 

During covid the Australian Taxation Office (ATO) wrote off many tax debts as uneconomic to pursue. 

This was to give small businesses assistance during covid. However, the ATO is currently pursuing these debts and you could get a demand for payment that you are not expecting.

You may have thought that your debt was written off and that the ATO would not attempt to collect it in the future. That’s not the case and a lot of debts are being followed up now. 

If you have a debt that was written off and has now been reinstated you should engage with the ATO or your tax adviser as soon as possible so that you can confirm the amount of the debt and work out a payment plan. 

It is always preferable to negotiate with the ATO rather than have them chase you for an unpaid debt.

In a recent press release the ATO advised taxpayers that they have issued Notices of Intent to disclose business tax debts for a large number of businesses. 

This means that if you have a tax debt of more than $100,000 which is overdue for more than 90 days you could receive one of these notices. 

If the tax debt is unpaid within 28 days or a payment plan hasn’t been entered into, the ATO will publish your tax debt to credit-rating agencies. This could result in your business having difficulty in obtaining finance and you could have problems with suppliers.

If you operate your business through a company the ATO has the power to issue a director penalty notice (DPN). You do not want to receive a DPN. It requires that you take action within 21 days. If you do receive one contact your tax adviser or the ATO promptly. 

In order to assist small businesses in the May budget, the government announced a lodgement penalty amnesty program for small businesses to encourage those businesses to re-engage with the ATO and get their tax obligations up to date without penalty. 

To be eligible for this amnesty you need to have overdue income tax returns, BAS’s or fringe benefits tax returns that were due between December 1, 2019 and February 28, 2022.

To be eligible for the amnesty your business must have an annual turnover of less than $10 million at the time that the original lodgement was due. 

If you fit this criterion and you lodge an overdue form between June 1 and December 31, 2023 all failure to lodge penalties applying to the late lodgements will be remitted automatically. 

Again, if you believe you are eligible for the amnesty, now is the time to seek professional advice to get your lodgement underway.

If you have any other ATO debt, the ATO has put out several bulletins indicating that it will be chasing unpaid debt. It is always preferable to be on the front foot so, again, I encourage you to talk to your income tax professional or the ATO to set up a payment arrangement.

The experts at Gail Freeman & Co Pty Ltd are able to examine your case and advise you on the next best step based on your current position including referral to others if required. Call 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.