Very taxing: What to do if you can’t pay your tax bill
If you run a business, there may come a time when you can’t pay your tax bill in full when it is due. Unfortunately, as the saying goes, the only certainties in life as death and taxes. So even if you don’t have the money, you will have to figure out a way to pay.
Thankfully the ATO isn’t intent on destroying a small businesses because of an overdue tax bill so there are ways that you can work with them to pay back what you owe.
Why are you taxed?
Taxes are an integral part in the running of this country and many others. Individuals and businesses all pay tax to the government and that tax money goes towards public works and programmes. Without taxes there would be no way to pay for roads, hospitals, public schools, or any other of a number of necessities that we take for granted in everyday life.
As an individual in Australia if you earn over $18,300 a year, you are eligible to be taxed. For a company there is no tax free threshold, you pay tax on every dollar your business earns. If your company earns more than $75,000 a year you also have to charge your clients GST and give that GST money to the government every quarter.
This means that your company has to file a tax declaration every year and pay back the tax you owe to the government accordingly. If you don’t file a declaration, you will soon have the ATO breathing down your neck.
If you don’t file a tax return, the government may audit you to figure out how much you earned and how much you owe. If you haven’t kept adequate records, they may just charge you the industry average earnings. Depending on your situation, this may well have you paying far more tax than you would have, if you had the paperwork done.
Your Business Activity Statement
Part of making sure to file your taxes properly is doing your Business Activity Statements (BAS) on time. For a business that earns under $20 million a year, you need to file these quarterly by the 28th of October, February, April, and July. If your company earns over $20 million a year (good work), you have to pay monthly by the 28th of every month.
The BAS is used to report your GST, PAYG instalments, PAYG withholding tax, and any other relevant taxes. Failing to submit them regularly and on time will be another way to have the ATO following up with you.
When you can’t pay your tax bill
You should routinely be putting a percentage of the money your business earns aside so you can pay your tax bill. Technically, this was never your money in the first place.
However, if you have failed to do this and you have had a lot of expenses, you may find yourself in a position where you can’t pay your tax bill.
When this happens, the ATO can offer you an installment plan. Like any debt, you will have to make regular repayments and pay interest on what you owe.
If you receive a bill higher than you were expecting, it may make sense to get some help. There may be a reason why it is so high such as a miscalculation.
A helping hand
The best way to find out if your tax bill is legitimately too high is to hire a tax accountant who can review your return and check if you have missed any details. Your tax accountant may be able to work backwards through several past tax returns to help you claw some cash back, which will help to negate your debt.
If an unpayable tax bill is purely because you haven’t been able to set the money aside, a good tax accountant will help you to work out an agreement with the tax office.
Concerned because you can’t pay your tax bill? Contact Mobbs & Co.