As you know, I have been saying for some time that the ATO is about to show its true colours. And it looks like they have just started.
It is something we noticed over time. Stricter telephone calls, unwilling to negotiate and quite happy to leave things as they are.
But now we are seeing timeframes for payment shortened. And in many cases, they are taking almost immediate action on late lodgement or payment.
There is good reason for this. Small business owes the taxman $50.2 billion, and there is a large chunk owed by medical professionals and their businesses.
The ATO recently advised that there were some businesses and taxpayers who refused to work with the ATO and the Tax Office would be taking “strong and deliberate action” (whatever that means) as it increased its activities across debt collection.
Before COVID, the ATO would typically agree to a 24-month payment plan without much fuss. Then Covid hit, and obtaining payment plans once things began to get to normal was also easy. Plans extending to as much as 3 years were available.
But it has all changed now.
12-month payment plans are the norm. Any longer, they will only consider this after much interrogation and large upfront payments. Do not be surprised if they ask for cashflow projections too.
And if you are late to pay by a few days on a payment plan do not be surprised if you receive a letter that says that the payment arrangement is cancelled.
We think it will get worse because we have heard of instances of a letter being received, and almost immediately creditor’s statutory demand to start the winding up process was received. That means the company must come up with a plan to pay creditors within 21 days.
All are very aggressive.
If you have a plan, we have one recommendation. Whatever happens, do not miss a payment, even for a couple of days.
With tight cashflows for medical businesses, it can become easy to miss payments to the ATO. Remember, when it comes to GST and PAYGW taxes relating to employees directors can become personally liable for these if not paid by the business.
Also, remember that if a Business Activity Statement is not lodged on time (i.e. lodged late or not lodged at all), the director or trustee will automatically become liable for the debt if the business is unable to pay. This is why we always advise clients to lodge BAS on time even if the business is unable to pay.
If you have a debt outstanding with the ATO, our advice would be to start talking to the ATO as soon as possible. At the very least, you will know where they stand, and it allows you to work out a plan.
Controlling taxes and ensuring you have sufficient cash flow to pay taxes are steps 2 and 5 of our 9 steps to working less, being financially free and creating wealth.