It’s that time of year when some of you may have received a tax bill from the ATO. Depending on the amount, it can sometimes be a stretch to pay it off in one go, meaning you need to sign up to a payment plan and pay in predetermined instalments over time.
So if you find yourself in the situation where you need to set up a payment plan, here are a few points to think about before you set one up, what you need to do while it’s in place and what having a payment plan means for you and / or your business.
What you need to know before you start your payment plan
The ATO is often quite fussy when it comes to how you can set up a payment plan. If your amount owing is under $10,000, you can often visit the ATO website and set it up there. However if the amount is more than that, you’ll need to call the ATO (shriek!) or your Arabon accountant may be able to help you to negotiate a plan that works for both parties.
The ATO likes to have payment plans top out at 12-24 months at a maximum, so having a set timeline before you call them is often favourable, showing you’ve thought about this plan already.
What you need to know during your payment plan schedule
When you commence a payment plan for your tax debt, it doesn’t take into account any future BAS amounts or tax debts that may arise.
Your debts don’t roll in together and you cannot keep adding BAS or income tax debt to your existing debt. Any new debt must be paid in full. If this isn’t possible, the ATO will default on your plan and you’ll face a tougher task in getting a new payment plan set up. So, it’s very important you adhere to the plan you’ve entered. You will be provided with a schedule once the plan is set up for you to follow. You can set this up to pay manually or via direct debit each month, week or fortnight depending on what suits your situation.
What happens if you don’t or can’t stay on schedule?
Once you commence your ATO payment plan, you must stick to the agreed terms; if you don’t, you “default” on the plan. The plan becomes void and your debt becomes overdue. It’s vitally important to know that if you do default on your plan, it’s tough to get the same plan back up and going. The ATO will be harsher on your terms, so treat your plan with respect and ensure you make your planned payments.