ATO Payment Plans

What is an ATO Payment Plan for businesses?

There may be times when cash flow is tight and paying your tax bills on time may be difficult.

In times like these, a payment plan with the Australian Taxation Office (ATO) may be a viable option allowing you to pay your debt over instalments.

Firstly, it's important to note that the ATO take your compliance history into account when assessing eligibility for a payment plan. It is important to make sure your lodgements are up to date regardless of whether you are able to pay the amounts outstanding in full.  

When applying for a payment plan the terms of the arrangement including the payment frequency e.g. weekly/fortnightly/monthly payments, the amount you are wanting to pay per instalment and the duration you would like the payment plan to be put in place for, need to be set out when applying.

For debts under $100k and where you have a good compliance history, the ATO are usually quite understanding and helpful when assessing eligibility.

Where the debt is over $100k and/or the ATO thinks there might be a reason to suspect the plan will default, the application requirements can be more stringent. The ATO may request that you demonstrate the financial viability of your business and request financial information from you and explanations regarding the need for the payment plan.

Common information that may be requested for consideration:

• Financial reports (eg. profit & loss, cashflow report);
• Profit margins;
• cashflow forecast;
• liquidity / working capital;
• Accounts receivable/payable positions (debtors & creditors);
• availability of other sources of funding.
  

Plans generally attract interest charges, although small businesses with less than $2 million turnover may qualify for interest-free payments. The interest rate is calculated based on ATO's general interest charge and ATO will continue to charge interest until payment is made in full.

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Default of a payment plan

Missing a payment or even paying late will automatically default the terms of your payment plan.

By defaulting a payment plan, the compliance history will be negatively affected and should be avoided where possible as this makes it more difficult to put future plans in place.

It is important to note that the on-going compliance history is also a condition of the payment plan. For example, if a payment plan is entered into for a certain lodgment and an upcoming lodgment is either not lodged or paid on time this will automatically default the existing payment plan. Should you need to return to the ATO, they will be sure to ask further extensive questions pertaining to the breach.

How to setup a payment plan

An ATO payment plan can be setup via the following channels:

• online via your myGov account. To make a payment plan online, go to Online Services for Business here and select Accounts and Payments, followed by Payment Plans;
• the ATO’s automated phone service for businesses on 13 72 26. When using the phone service, be sure to have your Tax File Number (TFN) and Australian Business Number (ABN) ready;
• through your Registered Tax Agent.