Payment Arrangements with the ATO

At the height of the global financial crisis, the Australian Taxation Office went out of its way to ease the burden of paying tax on the business community. Requests for a repayment arrangement for income tax or integrated client account debts (those reported on a BAS or activity statement) were mostly allowed and sometimes in a very lenient way. There were interest free arrangements allowed for the repayment of debts.

Times have now changed and the collection approach of the Australian Taxation Office is no longer as lenient. It is harder to obtain a payment arrangement and the requirements are more extensive than they were previously.

A number of people have had difficulties with the way that an old repayment arrangement was structured. It was not unusual for the arrangement to be a series of monthly payments followed by a large lump sum. At the time it was entered into, the arranger was proceeding on the basis that the large end payment would be the subject of another arrangement. They are now finding that it is much harder to defer tax liabilities and this can and has caused difficulties for some people.

Making you Personally Liable

The Australian Taxation Office has long had the power to make company directors liable for some unpaid tax.

A director’s penalty notice gave directors a short period of time to see the tax was paid, enter into a personally guaranteed payment arrangement or to put the company into administration or liquidation. If none of those options occurred, the director was personally liable for the tax debt.

New laws which became effective on 1 July 2012 have extended the circumstances in which company directors have a personal liability. Automatic liability can occur when superannuation and BAS forms are lodged late.  One interpretation of the operation of these laws is that they have retrospective effect. It would be a serious matter if late lodgement of a BAS some years ago gives rise today to a personal liability which did not exist prior to the 2012 law.

ATO Risk Management

Ideally, all taxation returns and BAS are lodged on time and paid on time.

Second best has always been to lodge the return or BAS on time and negotiate a payment arrangement. This risk management strategy is now more critical in light of the new laws.

Up to date lodgements and competent and credible communication between your adviser and the Australian Taxation Office can reduce the likelihood that payment arrangement requests will be refused and that you will be made personally liable for debts.

We can quickly bring your affairs into order and open lines of communication with the Australian Taxation Office.