OK, so now we’ve tackled some of the easier things you can do to turn things around and you’ve started generating some more cash flow to keep the lights on, it’s time to talk about some of the critical structural changes you should consider to make your business more stable and predictable long-term…
And Those Structural Changes Start With Getting The ATO Off Your Back…
Quite often one of the biggest problems you might face is owing a debt to the ATO. Having an ATO debt can hold you back and take up a lot of your mental bandwidth, leaving you unable to think clearly and act rationally.
If that’s the case and you are not currently working with a professional tax accountant, you should either immediately engage an accountant to deal with the ATO on your behalf, or you should contact the ATO yourself and deal with those outstanding payments directly by asking for a payment plan.
These days the ATO can usually be quite fair if you deal with them in good faith. They’re human beings as well, so in most cases you can explain your situation and they will work with you to come up with a suitable outcome.
The solutions they can offer range from putting you on a payment plan to ease your cashflow situation, or readjusting your current payment plan (if you have one) to reflect your current situation.
The beauty of working with an accountant or tax agent during this process is that most of the time, they will be a lot more proactive in engaging with the ATO and acting as your advocate to help you.
Because they have more experience at working with the ATO, and they have more authoritative positioning in the eyes of ATO staff, getting your accountant on the phone negotiating on your behalf and liaising with tax bureaucrats is a wise use of your money.
Sidebar – If you’d like us to help you and act as your advocate when dealing with the ATO, feel free to call us on 1300740066 or email us at firstname.lastname@example.org
Generally, if you’re proposing a payment plan, you’ll want to offer something that’s going to be acceptable and reasonable. And anything more than 12 months is not going to be looked at favourably.
If you’re proposing to pay your arrears off over 12 months, it’s more likely to be accepted than a longer-term arrangement. It all comes down to what you can afford without putting you into financial hardship.
So, with your advisor, take the time to work through what you can realistically afford, and then propose a payment plan based on those numbers.
Here’s Something You Must Be Aware Of
While payment plans with the ATO are not difficult to have approved if you’re reasonable with the terms and the length of your proposal (and depending on the amount you owe and your compliance history), you’ve got to make sure you honour your payment arrangement.
Something that can bring you undone is that after entering into a payment arrangement, but then don’t pay your ongoing tax liabilities as and when they fall due.
The honour system the ATO uses means that if any debts arise or fall due after the payment arrangement has been implemented, they need to be paid in full by the due date.
As an example, say you’ve got a payment arrangement and after you lodge your BAS you have an additional $5,000 of GST you have to pay.
To maintain your payment arrangement, you have to pay off the additional $5,000 by the due date or you’re technically in default. That’s because you’ve agreed to make sure any future debts are paid on time when the ATO approved your payment arrangement.
This is one thing that brings people undone all the time. In fact, I would in say nine out of ten situations where people on payment plans get into trouble, this is the reason.
Maybe it’s because of ignorance, or it could be that when the payment arrangement was entered into, the details weren’t carefully communicated to the client, but it happens a lot.
So, the main thing when you’re dealing with the ATO is to keep your word and act in good faith. Make sure you’re paying on time, and pay within the payment arrangement timeframes.
The other thing is, if you are behind on your ATO payments, whether it be BAS or your tax, that should be a trigger or a red flag for you to have a more meaningful and detailed conversations, not only with the ATO, but with your accountant or your professional advisor.
It’s important to take action because your situation appears to be changing, and you need to dig into the things that you need to work on, improve, so you’re looking forward as opposed to always trying to play catch up.
Dealing with the debt is one thing, but you should also be making sure that you’re not going to be in the same position 12 months or 24 months from now.
INVITATION: Each month we hold a limited number of Free Business Strategy Sessions designed to help business owners with everything from turning their enterprises around and back to sustainable profitability, to dealing with the ATO on your behalf, to leveraging the assets of fast growing companies so they can grow even more quickly.
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If you’d like to schedule one of these Free and obligation free one-on-one sessions, let us know by email at email@example.com or call 1300740066 and we’ll set things up for you.
About The Author: James Huy Vuong is a CPA, Registered Tax Agent, Business Broker, Certified Exit Planner and the owner of Your Accounting Partners, an Associate of Negotia Group. Partnering with businesses from start to scale thru to sale.
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