A business credit expert is urging businesses to get ahead of any tax debt – and know their options – to ensure they don’t fall foul of the Australian Taxation Office.
With last week (February 28) marking the deadline for FY23-24 company tax returns to be lodged, Grow Capital CEO Gus Gilkeson says businesses who believe they will have a tax debt need to be proactive.
“Simply delaying lodging your return is not a strategy. You risk being fined, accruing interest and the ATO definitely won’t ignore it.”
“Unfortunately, there are likely some businesses that know they will owe the ATO money this financial year and will put off lodging their return to avoid dealing with a difficult situation.”
“But sticking your head in the sand is not the answer.”
Mr Gilkeson says while not ideal, a business owing the ATO isn’t always a sign of something untoward going on behind the scenes.
“Perhaps your company has recently purchased or acquired another business and taken on its previous debts. It might be that you’re having cash flow issues as a result of unpaid invoices, or the business experiences a period of rapid growth that surpasses previous forecasts and projections.”
“Regardless of the reason, if you’re aware you’re going to have a tax debt, it’s always best to be proactive and get on the front foot. Speak with your accountant and other financial services providers immediately, or if you don’t have these in place, consider seeking professional advice.”
Mr Gilkeson says it’s important for businesses to understand there are options available;
Tax Debt Options
- Payment Plan: Can you enter into a payment plan with the ATO? Depending on the size of the debt, and the reasons why you can’t pay by the due date, you may be able to present a plan to repay over time. However, Mr Gilkeson says the ATO will require further details, including expenses and any assets the business might have.
- Financing Debt: Depending on your circumstances, Mr Gilkeson says securing finance to pay the tax debt in full might be a better option for some businesses, and could potentially avoid paying higher interest and/or penalties.
- Deductions: Know what deductions you’re able to claim, including prepaying interest, restructuring loans and writing down bad debts. However, Mr Gilkeson notes the Federal Government is looking to remove income tax deductions for ATO interest charges for overdue debts and says seeking professional advice is always best to ensure information is current and accurate.
- Proactive Communication: Simply ignoring ATO deadlines and hoping to deal with the matter at a later date is not an option, says Mr Gilkeson. “Proactive communication is always key. Keep the ATO and your financial services professionals well informed and let them know what to expect. Again, depending on your circumstances you may be able to come to an agreement, if you’re open and transparent about what’s happening within the business and what your intentions are going forward.”
Mr Gilkeson says it’s important for businesses to consider their individual circumstances, as there is no one-size-fits-all approach.
However, he emphasises that whatever the final decision, it’s best to take action to avoid the potential of fines, garnishee notices, directors’ penalties and being reported to credit agencies, all of which can impact future business and finance prospects.
“We know the ATO is actively looking to recoup owed monies, and if your business is one of them, it’s a matter of when, not if. Don’t put off those difficult conversations, it’s simply not worth the stress or the risk.”
Contributed by Gus Gilkeson is the CEO of Grow Capital.