Don’t let your tax debt get out of hand!
Tax debt is the amount of tax incurred during the previous financial year to which you owe to the Australian Tax Office (ATO). Debt to the tax office can become increasingly difficult to manage when the ATO enforces its penalties for late payment, thus creating even more debt for you! However, if you undertake the right measures and heed some advice you should be able to avoid these penalties and perhaps even some tax debt.
Failing to pay your tax debt on time can result in general interest charge (GIC) being automatically added to what you owe. GIC is calculated on a daily compounding basis based on your outstanding debt and is regularly added to your account. If you’re struggling to pay your tax debt off within the set period of time there are options available to help you. This can include making arrangements to pay by instalments or even deferring your payments to a later date. Your personal circumstances, particularly the ones relevant to your tax debt can also be taken into account.
Some easy ways to avoid tax debt are:
• Understand your tax obligations and budget for your tax.
• Keep money aside from a capital gain when selling an asset such as property or shares.
• Update your financial records regularly (at least once a month).
Addressing tax debt problems early on can prevent a lot of grief and stress in the future, also your tax debt will be much easier to manage. The tax office will be more helpful in this scenario as opposed to someone who deliberately avoids paying their debt.
By not paying your tax debt, failing to meet arrangements and avoiding contact with the ATO, legal action can and will be taken against you. If you find yourself issued with a garnishee notice or a director penalty notice you could become subject to wind-up and bankruptcy action.
Tax fraud and evasion is taken extremely seriously by the ATO. If you are convicted of such a crime you can be gaoled for up to ten years. There are also numerous other penalties such as community service, periodic detention, and good behaviour bonds, all of which will result in a criminal record if a conviction is made.
It is best to seek professional help sooner rather than later to prevent the issue from reaching a much more serious or illegal point. For this reason, it is best to seek such advice from an experienced tax lawyer early on, as they will be able to advise you on the best possible solution for your situation.
Here at The Quinn Group, being accountants and lawyers we have a lot of experience with tax law and can help you in these types of situations. The tax lawyers here can help you with any of your tax debt queries or issues. To submit an online enquiry click here or call us on 1300 QUINNS (1300 784667) or on +61 2 9223 9166 for more information.