3 steps for dealing with tax debt
Work out what you can afford to pay
If you’re struggling to pay back money you owe, the first thing to do is to work out what you can actually afford to pay by doing a simple budget. How to work out what you can afford to pay.
If you can afford to pay something
Start paying the amount you can afford and get in touch with your creditor straight away to put a repayment agreement in place.
If you can’t afford to pay anything
Call us on 1800 007 007 straight away for advice.
Contact the Tax Office as soon as you can
If you’re having trouble paying your tax debt due to financial difficulty, contact the Australian Tax Office (ATO) – the sooner the better.
The ATO has an area dedicated to helping people who face financial hardship. When you call them, you’ll speak with trained staff who can help you deal with your tax debt.
Explain why you’re having trouble paying and tell them about your current income, expenditure, assets and liabilities (see Step 1 about working out what you can afford to pay). They may ask that you fill out a special document for this, which they’ll provide.
Payment options to help you
The ATO has a range of options available depending on your situation. They might be able to arrange longer-term payment arrangements, stop charging you general interest temporarily, or waive fines.
The options for individual debt are not the same as the options for sole traders or small business owners. You may find you need two different solutions: one for your business debt and one for your personal debt. If you have both, don’t forget to tell the person you speak to.
If you’re in ”serious hardship”, the ATO may be able to release you from some, or all, of your tax debt. For information, see Release from your tax debt.
The ATO considers you to be in “serious hardship” when payment of the debt would leave you unable to provide food, accommodation, clothing, medical treatment, education or other necessities for yourself, your family, or other dependants. You can also claim serious hardship on your HECS-HELP repayments.
If the ATO refuses your request for a release on the grounds of serious hardship you can appeal that decision in a court or tribunal. Get legal advice.
If you can’t agree, you can dispute it
If you can’t come to an agreement with the ATO that you think is fair or you have another complaint, you have a right to seek a review with the Taxation Ombudsman. This free and independent service gives you an opportunity to make a workable repayment arrangement. The Taxation Ombudsman can assist with:
- assist you with an extension of time to pay;
- review the ATO’s debt recovery action;
- investigate delays with processing tax returns;
- follow up on delays in responses;
- confirm whether the relevant information has been considered for your matter;
- better understand the actions and decisions taken by the ATO (or the TPB); and
- identify other options you may have and the agencies that can help you.
Speak to one of our financial counsellors
If your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.
One of the easiest ways to keep your tax debts under control (or avoid them altogether) is to keep good records and be proactive.
- Even if you can’t pay the amount owed, make sure to lodge your tax return so that you don’t get a fine and so that the ATO can see you’re trying
- If one of your payments isn’t taxed, make sure to put some money aside to cover your tax
- Try to keep records of your jobs and the amount of tax you need to pay
- You might be able to get help with your tax return by using the ATO’s free Tax Help Program
What happens if?
I don't pay my tax debt?
If you don’t pay your tax on time your debt will get bigger and bigger because interest is added. This is why you should contact the ATO as soon as you can, so they can help you avoid this and work out a payment plan that suits your financial situation.
I want to apply for release from my tax debts?
Under tax law, you can apply for release from certain taxation debts, including income tax, withholding tax and Medicare levies and surcharges. Release from penalties and charges associated with the outstanding debts may also be granted.
I have a HECS-HELP debt?
Refer to HECS-HELP Debts for information about this.
KNOW YOUR RIGHTS
YOU CAN REVIEW
If the Tax office refuses to release you from your tax debt, you may apply to have the decision reviewed.