What to do if you cannot pay your tax bill in Australia

What is an ATO payment arrangement?

A payment arrangement is a formal agreement to pay a tax debt in instalments rather than as a single lump sum:

• You nominate weekly or fortnightly amounts you can afford
• The total debt must usually be cleared within 2 years
• Interest accrues on the outstanding balance
• The arrangement protects you from active collection action

The ATO generally accepts payment plans when:

• The debt is reasonable in size
• You demonstrate genuine inability to pay in full
• You have a stable income source
• You have not previously defaulted on arrangements

When is your tax due?

Tax debts have specific due dates:

• Tax owed from your return (lodged through a tax agent): usually 21 November
• Self-lodged: by the date shown on your assessment notice
• Quarterly BAS obligations: by the quarterly due dates
• Late lodgment penalty starts: 28 days after the lodgment due date

After the due date, the General Interest Charge starts compounding daily on unpaid amounts.

How do you set up a payment arrangement?

Through our team:

1. Get in touch with details of your tax debt
2. We assess the amount and your ability to pay
3. We negotiate the payment plan with the ATO on your behalf
4. We confirm the schedule with you
5. The arrangement is set up and your payments begin

Through our service, we structure the arrangement to fit your specific situation:

• Weekly or fortnightly instalments
• Direct debit from your bank account
• Reasonable total period (usually 12-24 months)

We typically negotiate better terms than self-applicants because we understand what the ATO will accept.

What if you leave Australia with an outstanding debt?

Tax debts do not disappear when you leave:

• The ATO can pursue debts internationally
• Significant outstanding amounts may affect future Australian visa applications
• The ATO can take action against any Australian assets you hold
• Bank accounts and investments remain accessible to the ATO

If you are planning to leave with a debt:

• Set up the payment plan before departure (much easier than from overseas)
• Use direct debit from your Australian bank account
• Keep that account open until the debt is cleared
• Have our team manage communications after you leave

What penalties apply if you ignore a tax debt?

The ATO has multiple penalties for non-payment:

• General Interest Charge (GIC): currently around 11% per year, compounding daily
• Failure-to-lodge penalty: $313 per 28 days late, up to $1,565 maximum
• Tax Debt Disclosure: large debts may be disclosed to credit reporting agencies
• Director penalty notices (for company tax debts)
• Garnishee orders: ATO can direct your employer to deduct tax from your wages

These penalties can sometimes be reduced or waived if you act early and demonstrate genuine hardship. Doing nothing always makes the situation worse.

What is the most important thing to do?

Act early. The ATO is more flexible when you approach them proactively than when they have to chase you. Specifically:

1. Do not ignore an ATO bill
2. Get in touch with our team before the due date if you cannot pay
3. We can negotiate a payment plan
4. We can apply for penalty remission in some cases
5. We can arrange to defer collection if an appeal is pending

The worst outcome is silence followed by collection action. The best outcome is a structured plan that works within your budget.

Can we apply for penalty remission?

Yes, in certain circumstances:

• First-time errors
• Genuine misunderstanding of obligations
• Serious illness or other extraordinary circumstances
• Substantial compliance with subsequent obligations

We apply for penalty remission when warranted. Even if not all penalties are removed, partial remission is often achievable.

Get in touch with our team as soon as you become aware of a tax debt. The earlier we act, the better the outcome.