Australian Tax Office Payment Arrangements

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We’re coming up to a busy time of year when BAS and income tax returns are due and many small businesses find themselves struggling to include Australian Tax Office (ATO) debts in their cash flow projections. Small businesses currently account for 63% of all outstanding ATO debts, which has sparked a push to toughen up on unpaid debts and unlodged returns, including business activity statements.  To help ensure you survive this busy time, we’ve put together a how to guide for dealing with ATO debts.

What if I don’t lodge my return or pay my debt?

The ATO have a range of penalties which they can impose for failing to lodge and pay your tax returns on time.  These include:


  • Interest on any outstanding debt accrued at 9.75% p.a

  • Failure to lodge on time penalties – $170 per 28 days up to a maximum of $850

  • Failure to maintain proper records or supply a document to the ATO – up to 75% of your liability

  • Utilising a debt collection agency to recover the debt

  • Issuing a garnishee notice to recover all outstanding amounts from your bank account

Can I get a payment arrangement?

The most important thing to remember is that the ATO aren’t a form of finance, however they do understand that running a small business can be tough and they are often willing to work out a fair and reasonable payment arrangement if need be.  Here are a few tips to help make negotiations more simple:


  • Ensure all outstanding lodgements are brought up to date;

  • The ATO often require an upfront payment of 50% – however if this isn’t possible, offer as much as you possibly can e.g. 25%;

  • The payment arrangement cannot go for any longer than 24 months;

  • Make sure you have taken appropriate steps to ensure the debt level does not happen again e.g.meeting regularly with your accountant or monitoring your cashflow closely on a monthly basis;

  • Estimate how much your need to put aside each month to ensure you can pay your next BAS at the end of the quarter in addition to your instalment and move this to a separate bank account;

  • Make sure the repayments are reasonable for your budget – defaulting on a payment arrangement give you a bad record with the ATO and can make future dealings more difficult.


I have a payment arrangement, now what?

The key to maintaining a payment arrangement is to make sure that you keep paying your installments on time in addition to all future activity statements.  If at any time you have difficulty making your repayments, let the ATO know in advance and they may be able to grant a small extension for this repayment.


For more information, on ATO payments, interest and penalties, see the ATO website.

If you want help, contact