How to Prevent the ATO’s Blitz of Garnishee Notices

How to Prevent the ATO’s Blitz of Garnishee Notices

Have you heard that the Australian Taxation Office (ATO) is pursuing tax debt more aggressively than ever? Its most recent strategy has been to send more garnishee notifications to business owners who still owe taxes. That implies that they could take money directly out of your bank account to pay off obligations. Everything you should know about the crackdown and how to prevent it are detailed below.

Be careful. Keep current.

The simplest approach to prevent the crackdown is to keep your taxes current, which virtually goes without saying. The ATO website lists all deadlines for filing business taxes and is a great resource for learning how to file and pay your BAS. The dates for filing can be found at; tax agents may have different deadlines.

What if you are unable to pay when due?

Maintain timely lodging of your tax return. You shouldn’t delay lodging your tax return just because you can’t make your payment on time. In fact, by failing to check in on time, you will be penalised and your financial situation will worsen. One of the biggest errors that business owners make is not providing payment because they cannot now afford to do so. It is preferable to lodge on time and speak with the ATO to arrange a payment schedule than to fail to lodge at all. Businesses that lodge even if they can’t pay right away are seen more favourably by the ATO (and credit agencies).

Proactive behaviour benefits everyone.

Due to the ATO’s requirement that unlodged returns be submitted before a payment plan can be established, lodging on time will actually help you save both time and money. You might even be able to work out an extension to avoid paying any fines.

Small business owners should know that the ATO is not trying to destroy them and that they can expect some leniency if they are prepared to cooperate. Here, communication is crucial. Be proactive and phone them to set up a payment plan if you’re worried you won’t be able to pay your taxes on time so they don’t have to go after you. They save resources by doing this, and you might avoid paying fines. It’s this proactive contact that might be able to keep you out of court or a garnishee letter.

What a tax debt payment plan entail

Keep in mind that any subsequent BAS payments are payable in full and on time even if you are able to work out a payment plan with the ATO. The ATO may cancel the payment plan and the entire amount becomes owing if you fail to make these payments. They might then send out a garnishee notice.

Regardless of whether you have a payment plan in place, your tax obligation will initially accrue interest, and the ATO will use any tax refunds you are entitled to decrease your debt.

Penalties for failure to pay

The ATO doesn’t want to close down your business because then they wouldn’t be able to collect any more tax from you. In actuality, the ATO’s debt collection programme only started bankruptcy proceedings in 1% of cases, according to an external evaluation of the ATO.

The ATO has no incentive to pursue tax obligations to the point where doing so harms enterprises. Having said that, they are undoubtedly punishing companies who amass and fail to pay their tax obligation far more severely. “We’re devoted to assisting taxpayers who want to do the right thing and stopping those who don’t pay from enjoying an unfair financial advantage,” the ATO website states. The ATO will make an effort to get in touch with you by phone, letter, SMS, and MyGov communications. In the absence of a response, they reserve the right to seek payment through a collection agency or through the use of any ensuing credits or refunds. A director penalty notice or a garnishee notice may be issued by the ATO if you don’t cooperate with them to demonstrate that you are ready and able to pay your tax due.

Notices of garnishment and collection companies

Without a payment plan in place, the ATO may refer your debt to outside collection firms as its next course of action. Your credit score may suffer as a result, which could jeopardise future applications for business loans. Read our blog post on ATO tax arrears to learn more about what the ATO can do with your tax debt information.

‘Stronger actions’ by the ATO

Additionally, they have the option of taking what they refer to as “stronger steps,” such as garnishee and director penalty notices. One of the most crucial lessons to learn from this is that the ATO will only take this action against business owners who:

 • Refuse to Work With Them

 • Repeatedly Default on Agreed Payment Plans

 • Don’t Have the Capacity to Pay and Don’t Take Steps to Improve Their Situation

• Were Subject to an Audit Where Deliberate Avoidance Was Detected and Payment Avoidance Continued

 • Appear to Be Engaging in Phoenix Activities (using liquidation to avoid financial obligations without risking assets and with the intention of resuming business operations through a new entity).

In prior information packs, the ATO reaffirmed that it only employs garnishee notices when the business owner refuses to work with it to resolve outstanding tax issues.

Managing your tax debt

Dealing with past-due tax debt can be challenging, in addition to keeping your cash flow under control and submitting your taxes on time. The ATO does provide payment plans for companies seeking to pay off their tax burden, but these aren’t necessarily appropriate for Small to Medium Enterprises (SMEs).

Refinancing your tax debt into reasonable biweekly payments is an additional choice. In order to prevent the financial and emotional strain of mounting tax debt and possibly legal actions, one method to accomplish this is by getting a business loan to pay off your tax burden. You can refinance it rather than attempting to pay off $50,000 in ATO debt all at once, which will obliterate even the most healthy cash flows. It may be more cost-effective for certain enterprises to obtain a business loan, settle the ATO debt, and handle the fortnightly repayments.

We specialise in working capital loans for SMEs and provide small firms with adaptable financing alternatives to pay off ATO debt. We’ve already assisted other businesses in managing their cash flow and getting control over their tax debt.