What to do when you fall behind with your tax obligations
Life happens. An illness takes you away from your business for a while, a flood disrupts all of your plans or a burglary requires a restock when cash flow was already low.
These kinds of events can have a flow-on effect on your business and you might find yourself falling behind in paying your income tax, or your BAS payments, on time.
You may also have fallen behind in your tax obligations because your business had a growth surge and adjustments weren’t made for increased tax payments.
Either way, overdue tax payments can become a slippery slope very quickly. I’ve seen people not facing up to their obligations, leaving it for so long that it became a scary thing to handle. Others have become confused about how to deal with the situation and continuously ignored messages from the ATO.
We’re all human, sometimes we don’t handle situations in our business the way we should have. This is an encouraging message to take action if you've fallen behind with your obligations because, even if you push it to the back of your mind, there will be a constant state of stress occurring that saps your energy and emotions that is not good for you.
I’ve outlined below the two steps you can take to resolve any overdue tax obligations you have.
1. Talk to your Accountant
Depending on how often you see your accountant and the type of service they provide for you, they may already know what is going on. If your accountant is reaching out to you about the situation don't ignore them, they are there to help you and can work with you to figure out a payment plan.
If you haven’t spoken to them for a while, then bring them up to speed on what has happened so you can figure out an action plan together.
When you don’t already have an accountant, it can be hard to know where to turn. Ask around and find an accountant that you can book a one-off meeting with to talk through your situation and create a plan for you to clear your debts. I offer one-off two-hour-long meetings to deal with these kind of situations.
Your accountant can only help you if you take that first step to talk to them. They can also deal with the ATO on your behalf.
Where a one-off event, like a flood, has happened you may be able to access relief payments, government grants or insurance payments. The accountant you talk to can help you find out what is available, if it's taxable income and include it in your plan.
If a surge in business growth has caused you to fall behind in your payments your accountant can help you review your systems and processes for paying your tax to make sure payments happen on time going forward (and are documented correctly too). As well as paying income tax and BAS on time, it’s essential that you’re paying any superannuation payments for employees on time as the penalties are severe for overdue payments.
2. Talk to the ATO directly
If you feel comfortable talking to the ATO directly then contact them. You will need to have worked out how much you can afford to pay to clear the debt, and when you can make those payments.
The ATO may ask for information to back up your proposal e.g. balance sheets, profit and loss statements, bank statements, and debtor and creditor information.
The overwhelm of unpaid tax obligations won't go away if you ignore it. The situation will only get worse if you don't deal with it as penalties and interest can accrue, so the sooner you take action the better.
It can take time to clear your debt, so patience and consistency are important. The longer you leave your tax unpaid the longer it will take you to clear that debt.
Remember there is support to help you through this. It’s up to you to take that first step and reach out.
If you’re ready to take action to resolve your overdue tax obligations, then book in a 2-hour session with me. Book your call HERE