With the Australian Taxation Office (ATO) stating that it is going to pursue small business tax debts more aggressively, it is prudent for you to ensure you have your ducks in a row so that you do not fall further foul of the authorities.

If your small business is grappling with a concerning level of tax debt to the ATO, there are a few things you can do to manage and potentially mitigate the situation.

Proactively Engage With the ATO

The worst thing you can do if you are facing a mountain of tax debt is to go radio silent and hope it goes away.

Rather, you should initiate early and transparent communication with the ATO regarding your financial challenges so that a solution can be worked out. If you demonstrate a willingness to address your tax obligations, you might find that the ATO is willing to negotiate more favourable terms, such as flexible payment arrangements or even deferred payment plans.

If you proactively seek assistance for your business, the ATO is likely to be more accommodating than punitive.

Negotiate Payment Plans

The ATO is generally open to negotiating tailored payment plans that align with your cash flow capabilities. This means that you can likely find a repayment plan that allows you to pay your business tax debts in installments if an immediate settlement is not possible.

However, one should enter such an arrangement with caution, as a failure for your business to comply could result in personal liability being triggered.

Maintain Compliance With Employee Obligations

One of the things that many small business owners do not realise is that if they ensure all their employee-related tax obligations are up to date, the ATO will treat them somewhat more leniently.

For example, you need to ensure that superannuation contributions are up-to-date. If you do these things, the ATO will view this as a positive indicator of your business’s commitment to its responsibilities. This can influence the ATO’s approach to debt recovery when it comes to your business.

Although providing fringe benefits to employees is subject to fringe benefits tax, it does demonstrate investment in employee welfare, which is viewed favourably.

Consider Restructuring Your Business

If you find that there is a likelihood of an ongoing tax debt problem that you can’t resolve, it might be necessary to explore a formal restructuring process. If your business is eligible, you can develop a debt restructuring plan while still remaining in control of your operations.

This situation provides you with some degree of protection from creditor enforcement actions during the restructuring period, giving you some breathing room to get your affairs in order.

If you need assistance with sorting out your tax obligations so that you do not fall foul of the ATO, then contact Infuse Advisors & Accountants today. We offer expert tax and accounting services.