Not everyone gets a tax refund at the end of the financial year. If you underpaid tax during the year — perhaps because your employer withheld at the wrong rate or because you had unwithheld ABN income — you may end up owing money to the ATO. If the amount is more than you can pay immediately, there are options available.
What is an ATO payment arrangement?
A payment arrangement is an agreement to pay a tax debt in instalments over time rather than in a single lump sum. The ATO offers this as a formal option for individuals who owe tax but cannot pay the full amount by the due date.
Interest applies to payment arrangements, as the debt is being deferred, but the rate is generally lower than the penalty interest charged on debts that are simply ignored. Acting proactively is always better than doing nothing.
When is tax due?
Any tax debt from your tax return is generally due by 21 November of that tax year if you lodged through a tax agent, or by the date shown on your assessment notice if you lodged yourself. Debts not paid by the due date begin to accrue the ATO's general interest charge, which compounds daily.
How to set up a payment arrangement
A registered tax agent can set up a payment arrangement with the ATO on your behalf. Talk to our team and we will make sure the arrangement is structured in a way that works for your situation.
You nominate how much you can pay per week or fortnight and the arrangement is structured accordingly. The ATO typically requires the debt to be paid within a reasonable period, usually under two years.
What if you leave Australia before paying?
Leaving Australia with an outstanding tax debt does not extinguish it. The ATO can pursue debts internationally, and significant outstanding amounts may create complications if you apply for another Australian visa in the future.
If you are planning to leave before your tax return is finalised, ensure you have an Australian bank account available and a tax agent who can manage communications on your behalf after you depart.
Penalties for late payment
The ATO charges a general interest charge on unpaid tax, compounding daily. If a tax return is lodged late, a failure-to-lodge penalty may also apply — currently $313 for every 28 days the return is overdue, up to a maximum of $1,565.
These penalties can be reduced or waived in certain circumstances. A tax agent can assist with applying for penalty remission if your situation warrants it.
The most important thing
Do not ignore a tax debt. The ATO has broad powers to recover amounts owed, and debts do not disappear after you leave Australia. Contact a tax agent or the ATO directly to discuss your situation and set up an arrangement before the due date passes.
Need help?
Dealing with a tax debt and unsure what to do?
Our team helps working holiday makers manage ATO obligations including payment arrangements. Talk to us on WhatsApp.
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Can you appeal an ATO decision in Australia?
If you disagree with an ATO assessment or decision about your tax, you have the right to challenge it. Here is how the appeals process works for working holiday makers.