Stop Tax Debt Stress with an Effective Tax Payment Plan for 2024

Are you a business owner who gets overwhelmed when dealing with tax debt? Well, having a tax debt payment plan in place can help alleviate some of that stress and make it more manageable. In this blog post, we will provide you with details on how to understand payment plans and walk you through a step-by-step guide on how to set up a tax payment plan effectively.

Understanding Tax Debt Payment Plan 

Dealing with a tax debt can be a stressful experience for anyone. If you’re someone struggling to pay off your unpaid tax balance, then an option available to you is a tax debt payment plan.  

A tax debt payment plan is an agreement that allows you to break down your outstanding tax payments into smaller, more manageable amounts made in installments over a specific period. These payments can be made on a weekly, fortnightly, or monthly basis, depending on what suits you best.  

While the debt still accumulates general interest charges (GIC) daily, paying back your loan quicker will help to reduce those GIC accumulating on your unpaid balance. This can provide an opportunity to help you finally pay off your unpaid tax balance. 

Things to Consider When Planning to Set up Tax Payment Plan 

Before jumping into a payment plan, it is essential to consider certain factors: 

1. Firstly, you need to assess if you can pay what you owe today, as this will reduce the amount of General Interest Charge you pay.  
2. It would be best if you determined how much you can pay today and when you can pay in full. Using an online payment plan estimator can be extremely helpful in determining the payment plan that suits your budget. The tool helps you calculate the payment amount, pay-off term, and the amount of interest you will be charged. 
3. It is important to note that the longer you take to pay off your tax bill, the more interest you accrue. Once you work out the best payment plan based on your circumstances, you can use it as a guide to meet your unpaid tax balance.  
4. You still need to lodge your obligations and pay any associated liabilities on time while factoring in payment for your ongoing obligations in addition to any payment plan. 

Setting up a Successful Tax Payment Plan 

Don’t let tax debt snowball out of control. Take charge by working on a realistic payment plan that fits your finances: 

Assess your tax debt 

The first step in setting up a tax payment plan is to assess the amount of tax you owe. This includes reviewing your past tax returns, correspondence from the Australian Taxation Office (ATO), and any other relevant documents. By understanding the full extent of your unpaid tax balance, you can better determine how much you can realistically afford to pay each month. 

Contact the ATO 

Once you have assessed your tax debt, the next step is to contact the ATO to discuss setting up a payment plan. You can do this by calling their general enquiry line or contacting them through their online portal. Be prepared to provide information about your financial situation, including your income, expenses, and assets. The ATO will work with you to create a payment plan that fits within your budget. 

Negotiate terms 

When setting up a tax payment plan with the ATO, it is essential to negotiate terms that are realistic for your financial situation. This may include spreading out payments over an extended period, reducing penalties or interest charges, or even negotiating a lump sum settlement if possible. Remember that the ATO’s primary goal is to collect the outstanding tax while also ensuring that it is affordable for you. 

Stick to the plan 

Once you have set up a payment plan with the ATO, it is crucial to stick to it diligently. Make sure to make your payments on time each month and communicate with the ATO if there are any changes in your financial situation that may affect your ability to pay. By staying committed to your payment plan, you can gradually reduce and eliminate your outstanding tax. 

Seek accountant’s help if needed 

If you find yourself struggling to set up a payment plan or negotiate terms with the ATO, your tax accountant can provide valuable guidance and support throughout the process and help ensure that you are making informed decisions regarding your tax bill. 

Managing a Tax Debt Payment Plan 

Now that you have set up a payment plan with a manageable monthly payment, it’s time to manage hassle-free payments: 

1.Set up a direct debit

The easiest way to manage your payment plan installments is to set up a direct debit. You can do this when you create your plan, using either your bank account or a credit/debit card (fees apply).  

Important Note: Only the cardholder can set up a direct debit with a credit/debit card. 

2.Update installments to change how you pay 

Need to adjust your payment method, installment amount, date, or even cancel an installment entirely? You can easily modify your plan online, but be sure to meet the deadlines: 

• 1 business day before the due date for direct debit via credit/debit card. 
• 3 business days before the due date for direct debit via bank account.

Important Note: If the current payment plan is longer than 24 months or if the changes will result in a longer than 24 month extension of the plan, it cannot be changed online. 

To update this online: 

• Individuals & Sole Traders: Access the ATO online services Payment Plan page. 
• Businesses: Utilise the online services for business on the Payment Plan page. 

Small businesses may be eligible to spread out interest-free payments over a 12-month period if there are outstanding activity statement amounts. Contacting the ATO via phone during operating hours can help you check your eligibility and make the necessary changes to an interest-free payment plan if eligible. 

Conclusion 

Setting up a tax payment plan may seem daunting at first, but by following these steps and being proactive in addressing your tax obligations, you can take control of your finances and work towards resolving your tax bill efficiently. Remember always to communicate openly with the ATO and seek assistance when needed to ensure that you are on track towards becoming financially stable once again as a business owner. 

Wardle Partners Accountants & Advisors team can guide you through the setup process, answer your questions, and ensure you meet all deadlines and avoid late fees. Get in touch with us so we can ensure your payment plan is tailored to your situation and is optimised for efficiency.