Yes. If you cannot pay an ATO bill by the due date, a payment plan clears it in instalments. Interest keeps accruing through the General Interest Charge, so a plan costs more than paying outright and far less than silence. Tax debts do not lapse when you leave Australia.
Why does a working holiday maker end up owing at all?
Because some income had no tax withheld. ABN or contractor income is the most common, since the full invoice reached you. A wrongly claimed tax free threshold is the second. Cash work with no withholding is the third.
None is noticed at the time. All three feel like slightly more money each week and arrive as a single figure months later.
What is a payment arrangement, and when will the ATO agree?
A formal agreement to pay in instalments rather than a lump sum, usually weekly or fortnightly by direct debit, with the debt typically cleared inside two years. While it is in place and being met, it protects you from active collection action.
The ATO generally agrees where the amount is proportionate, you can show a genuine inability to pay in full, there is an income source behind the instalments, and you have not defaulted on a previous arrangement. Approaching before the due date works better than being chased.
What does it cost to take longer?
The General Interest Charge compounds daily on the outstanding balance and is set well above the cash rate. It runs from the original due date, not from the date the plan starts.
Lodging late is penalised separately from paying late. Failure to lodge is charged at one penalty unit for every 28 days a return is overdue, currently $330, capped at five units or $1,650. The penalty attaches to not lodging, so lodging on time and paying late is materially cheaper than doing neither. Our guide to late lodgement penalties covers when it is applied.
What happens if you simply leave?
The debt stays. The General Interest Charge keeps accruing, the balance offsets automatically against any future Australian refund, including the final return most backpackers lodge after leaving, and it stays on your ATO record.
An outstanding tax debt can surface against a future Australian visa application. Small balances are occasionally written off, but that is the ATO's decision and not one to plan around.
What should you do before you fly?
Set the arrangement up while your Australian banking still works. Direct debit from an open Australian account is what keeps working from overseas, and closing that account breaks the plan.
Check the balance before you go. Hardship and remission requests can be handled by correspondence from overseas, but setting the plan up is far easier from inside Australia.
Can penalties ever be reduced?
Sometimes. Remission is considered for first time errors, genuine misunderstanding of an obligation, serious illness or other extraordinary circumstances, and where you have complied properly since.
Remission is discretionary, not automatic, and partial remission is more common than full. Delay does not help, because the case for a genuine misunderstanding weakens each month.
What if you think the amount is wrong?
Dispute it rather than simply paying it, but do both in parallel where you can. An assessment you believe is wrong can be amended, generally within two years of the original assessment issuing, and a decision you disagree with can be objected to formally.
Neither step pauses the General Interest Charge. Interest keeps accruing on the disputed amount while the objection is considered, so where the sum is large it is usually worth arranging a plan and disputing at once. Our guide to amending a tax return covers which route applies to which kind of error.
Short inconvenience or two year arrangement?
Whether a plan is available, and what it costs, turns on facts specific to your position.
- What produced the debt: ABN income, a wrongly claimed threshold and unlodged years lead to different fixes.
- Whether the return is lodged, since the failure to lodge penalty is separate from the debt.
- How large the balance is against what you can pay, which decides whether the ATO accepts the schedule.
- Whether an Australian bank account remains open to service the direct debit.
- Whether you are still in Australia, which makes setting the plan up much easier.
- Whether a refund from another year is due, since it offsets against the debt automatically.
- Whether there are grounds for remission, worth raising early rather than late.
A debt usually starts with a return not prepared with the full picture, and the working holiday tax return is where the position is put right. You can estimate your tax refund for other years to see whether an offset is coming.