What are the Australian Tax Office collection methods for tax debt?

Why is the ATO debt collection so forceful?
April 23, 2020
What Is the tax debt loans application process?
April 23, 2020

The ATO has several collection methods at their disposal for collection of ongoing and outstanding payments. As a result, you may encounter, or use the methods listed below.

ATO Automated Tax Collection

These methods are standard practices implemented by the ATO to simplify business compliance.

  • Single Touch Payroll
  • Equally, Electronic Lodgement of Superannuation (SGC)

Tax Debt Payment Plans

  • Firstly, Payment Plans can be established with the ATO. However, not all payment terms offered can be anywhere from 18 months to 2-years to clear the ATO debt. Therefore, achieving a suitable payment may not be possible with such short payment terms. Furthermore, click here for more information on ATO Payment Plans and the benefits and risks for your business.

Debt Collectors

The debt is sent off to one of several debt collection agencies to recover the debt.

Finally, the ATO can lodge a second mortgage to secure their debt. Consequently, a second mortgage would allow the ATO to force the sale of your property in the event of a default. Indeed, a second mortgage would avoid the need to employ and pay a bankruptcy trustee to collect on the tax debt.

How does the ATO Force Debt Collection?

When a business doesn’t fit into the payment plan requirements of the ATO, then other collection methods are used. However, along with these collection methods is usually the closure of your business. Therefore, a payment plan or finance option is almost always the best solution.

  • Firstly, Business Wind Up- the ATO can close your business because of tax debt. As such, the ato can force a company liquidation to pay a tax debt.
  • Indeed, ATO Bankruptcy – a personal bankruptcy gives a bankruptcy trustee the power to sell your assets to pay your ATO debt.

Other Debt Collection methods

  • Not economical to pursue – The ATO can hide your debt from the portal view. Consequently, waiting until you gain an asset, they can sell. Similarly, you may become more profitable and garnish funds in your bank. For that reason, we feel the correct term would be “not economical to pursue now.