Tax time – that once a year situation when you can submit a tax return form to the ATO and, hopefully, look forward to your refund. Time to treat yourself!!
However, not everyone is in the happy position that you have overpaid along the way and now eagerly anticipate the refund. Some people, for a variety of reasons, might have underpaid on their taxes throughout the year and now owe the ATO. This will often happen where you earn a lot of interest or other non salary income, or maybe a capital gain on the sale of an asset.
In this case, there is a chance that the debt you owe is a larger than you cannot pay by due date. You may wish to pay in instalments. In order to pay in instalments you need to contact the tax office and get approval.
The first step you must take when you realise you cannot pay your tax debt in full is to contact the ATO by phone. Once you have made contact there is an option to pay an outstanding debt. If you owe under $25,000 you can attempt to create a payment plan through an automated system. The system will guide you through several different questions that you must answer appropriately to. You can either say what you propose, or ask them to make a suggestion. You either accept or ask for a shorter or longer period. Once completed with the automated system, your request will either be approved or denied. If denied you will be put through to a person to negotiate with. If approved you can make payments until your tax debt is paid in full. The ATO will send you out confirmation.
If you owe above $25,000 you will be directed towards a live operator who will guide you through the process and ask the relative questions to your circumstances. It is important that you get a resolution that you can afford, as you will be expected to pay any future obligations when due while the arrangement is in place. If you do not make contact, the ATO will commence debt recovery processes and there is a chance that they could even bankrupt you or garnish your bank accounts.
In most cases, the maximum amount of time to pay off your tax debt is two-years. Please note that this is for most cases but there are exceptions to the rule. If it is beyond a two-year payment plan, you will need to be approved.
One of the most important things to remember when you are handling your tax debt is that you must communicate with the ATO. If communication is lacking and no attempts are made, repercussions will soon follow.