It is not uncommon for taxpayers to owe tens of thousands in tax debt to the ATO as a result of extenuating factors beyond their control. Where primary tax is not paid on time the ATO imposes interest and penalties which can make an already large tax debt more difficult to repay.
The tax laws authorise the ATO to impose administrative penalties for conduct such as:
- making a false or misleading statement or taking an unarguable position
- failing to lodge a return or statement on time
- failing to withhold amounts as required under the PAYG withholding system
- failing to meet other tax obligations
The penalty amount is calculated using either a statutory formula which ranges from 25% to 90% or in multiples of a penalty unit. The purpose of the imposing a penalty and interest is to encourage taxpayers to take reasonable care in complying with their tax obligations.
It is important to know your options for tax debt relief to prevent overpaying the ATO and averting enforcement action which could see you being made bankrupt or your company liquidated. Your circumstances, including your compliance history and mental health, are important factors in this process.
The following are strategies that could be utilised as part of a tailored management plan:
- Request for remission of interest and penalties
- Application for remission of penalties based on safe harbour principles
- Objection of default assessments
- Offer of compromise of debt
- Providing security to the ATO
- Application for release on hardship grounds
The right option or combination of steps can only be assessed on a case by case basis. Obtaining the assistance of a tax professional at an early stage will help you take a course of action tailored to your circumstances. The ATO expects taxpayers to be proactive in the management of their tax affairs.
If you require advice or assistance on a tax debt management strategy, please contact our team of tax accountants and tax lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.