Tax Debt

The Tax Office has well developed policies for handling the payment of tax debts which are overdue. However with discretion in the hands of individual tax officers, implementation of debt collection processes can be inconsistent, so it is important to research available debt management options carefully.

Debt negotiations can be lop-sided, with a taxpayer induced to agree to terms under threat of penalty. Demands for a 50% tax payment up front as a condition of a repayment agreement are not uncommon, with stronger action to follow if terms are not fully met.

See the calculation of penalties here..

The general receivables management policy has a friendly face, with negotiation as a core element, however Government budgetary commitments reinforced by politics mean that Treasury and the Tax Office are under enormous pressure to collect money.

A recent report from the Inspector General of Taxation has highlighted some of the consequences of substantial levels of tax debt faced by the Tax Office with the consequence of less than perfect administrative processes.

Notwithstanding that, there exist official channels for ameliorating the direct impact of tax debt, especially in the face of unforeseen circumstances. Given the powers of the Tax Office to launch legal processes if they so choose, and the potentially expensive financial penalties for late or non-payment, proactive contact as soon as a problem arises makes sense.

Natural disasters

For those affected by natural disasters, help is available which may include time to lodge and pay, remission of penalties and speeding up tax refunds.

See People affected by natural disasters

Serious Hardship

The Tax Office can fully or partially wipe a tax debt under the serious hardship provisions for individuals, but not companies, trusts or other non-individual entities.

Release of a tax debt requires:

  • the submission of financial information, including income and assets, demonstrating an inability to afford the normal family necessities of life, which include food, housing, medical treatment and education.
  • all relevant returns lodged up to date

See Release on grounds of hardship

Negotiated debt repayment plans

The first step in a tax debt negotiation will depend on the size and nature of the debt. For debts over $100,000, a phone call is the starting point.

 Debts below $100,000

There is an automated telephone application service for debts below $100,000 to get approval for a late payment or pay by instalments with no need to talk to a tax officer.

For further information see:

The Big Stick

If for some reason you have not been able to comply with a repayment agreement, the ATO’s position is that “firmer action” is justified. This may include legal action. 

For further information see 

As with all matters involving the repayment of debt, early action or intervention is strongly advised, in order to minimise the impact of unmet commitments and accumulated penalties.

Disputed Tax Debts

The general position is that the Tax Office requires taxpayers to pay at least 50% of a disputed debt immediately or else provide security for the payment of the entire debt.

For further information see:

Further information

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This page was last modified on 23 Aug 2017