Businesses that are unable to pay their statutory debts with the Australian Taxation Office (the ATO) when they fall due may find themselves facing possible insolvency. In this article, we summarise two options available to help businesses meet their statutory obligations and mitigate the risk of insolvency.
The first step is to ensure that all tax lodgements have been made. The second is to be proactive and take the necessary steps to pay statutory debts, including, if necessary, under an approved payment arrangement.
ATO lodgement amnesty program
The ATO has recently introduced a lodgement amnesty program to help small businesses get their tax lodgements back on track. The amnesty program started on 01 June 2023 and is in place until 31 December 2023. Announced in the 2023-24 Budget, the amnesty program applies to overdue income tax returns, fringe benefits tax returns and business activity statements that were originally due between 01 December 2019 and 28 February 2022.
To be eligible for the amnesty, small businesses must have an aggregated turnover of less than $10 million at the time the original lodgement was due. But the amnesty does not apply to privately owned groups or individuals controlling over $5 million of net wealth. Under the amnesty, the ATO will proactively remit any associated failure to lodge penalties for those businesses that lodge their overdue forms. It is important to note that the amnesty does not cover superannuation obligations or other administrative penalties associated with the Taxable Payments Reporting System.
In the event that the lodgements result in liabilities which are unable to be met, businesses are encouraged to reach out for assistance. The ATO offers support options, including payment plans, to assist small businesses. The ATO has stated that it aims to work with taxpayers to ensure they meet their obligations during the amnesty period. By participating in the amnesty with the ATO, small businesses have the opportunity to rectify their tax lodgements and avoid further penalties while getting their tax affairs back on track.
ATO payment plan option
Payment plans with the ATO are available to various entities, including individuals, sole traders, and businesses allowing them some flexibility to manage their financial obligations effectively. Payment plans allow entities to manage their financial obligations by breaking down payments into smaller, more manageable amounts spread over a fixed period.
Entities considering a payment plan with the ATO should consider the following:
- Determine the affordability to ensure that the scheduled instalments can be paid on time.
- Determine the payment instalment timing which can be weekly, fortnightly, or monthly.
- Take into account all future financial obligations to ensure that both current and upcoming payment commitments are met.
- Additional information regarding income, expenses, assets, and other financial details may be requested to establish an appropriate and manageable payment plan.
Entities should keep the following points in mind when considering a payment plan:
- Businesses with debt to the ATO of $100,000 or less, can set up payment plans using online services for business, or through a registered tax or BAS agent.
- Entering a payment plan does not replace the obligation to lodge activity statements, tax returns, and pay any associated liabilities on time.
- Any tax credits or refunds received will be used to reduce the tax debt but will not replace the required instalment payments.
- General Interest Charge (GIC) will continue to accrue until the debt is fully paid. GIC charges can be reduced by making additional voluntary payments or by paying off the debt as soon as practicable.
Businesses are encouraged to take all reasonable steps necessary, including utilising the ATO amnesty and payment plan programs, to satisfy their statutory obligations with the ATO and to avoid the possibility of insolvency.
