Dealing with the ATO in difficult times
In the current economic environment, businesses struggling with their cash flow may find meeting their tax obligations increasingly difficult.
One option is to negotiate deferred payment arrangements with the ATO.
In the current economic environment, businesses struggling with their cash flow may find meeting their tax obligations increasingly difficult.
One option is to negotiate deferred payment arrangements with the ATO. The ATO will only agree to such arrangements if they are made in accordance with strict risk management guidelines. These guidelines are available on the ATO website.
In order to have the greatest chance of success in negotiating a deferred payment arrangement, business owners should prepare:
- An explanation of the factors that have led to the company being unable to meet its outstanding taxation obligations
- Details of the company’s current financial position, including the latest set of financial statements and debtors and creditors aged balances
- Details of how the company proposes meeting its outstanding taxation obligations, such as an injection of equity or loan funds
- Supporting documentation to show that the ATO is being treated in the same way as the company’s other creditors and will not be disadvantaged by entering into the arrangement. This is normally provided by cash flow and budget statements
- A realistic payment proposal which is achievable by the company and clears the outstanding taxation debt in the shortest possible time
- An undertaking from the company that it will keep its lodgements up to date, and pay its future tax obligations on time.
It is unlikely that the ATO will entertain entering into an arrangement unless all past taxation lodgements for the business are up to date.
In addition, there is a far greater chance of success if the ATO is advised of the difficulties early, rather than after the taxation debt has escalated to a significant level.