Tax Debt payment

Are you worried about paying tax on time especially if you are facing a financial crisis or are you tired of paying a huge tax debt to ATO

Furthermore, paying full tax debt on time to the ATO is a very tedious task. You need a proper plan to pay full debt (which is the ideal thing to do in time) to ATO otherwise there are serious consequences.

So, if you need to set up a tax bill payment plan, tax return payment plan, ATO payment plan and if the ATO charges any interest on payment plans, we have got you covered.

Stay with us to complete the whole journey of the tax debt payment plan.

Also Read About Tax Return Mistakes:

What is a payment plan?

A payment plan allows you to break down your whole payment into smaller chunks in a short period of time. The plan depends upon your personal preference whether you want to pay weekly, fortnight or monthly. 

IMPORTANT NOTE: Once you enter in a payment plan then no further debt would be lodged into your account (only if you stick to the payment plan strictly).

Also Read About HECS DEBT Repayment:

Tax Debt payment

Who can opt for a payment plan?

Here is the list of those people only who can enter in a payment plan. They are;

  • Individuals.
  • Sole traders.
  • Businesses.
  • BAS (business activity status) agents or registered tax agents on behalf of their clients.

The longer you delay the payment, the higher the GIC. No idea what a GIC is? Let’s have  a look at that first.

What is GIC?

General interest charge or GIC is the interest added when the tax is not paid in due time. In Australia, the GIC rate is around 10.3% which has increased in recent years.

Before we jump into the payment plan, there are some important points which you must consider (especially if you are a beginner in this field) before starting the payment plan. 

Let’s get started.

Things to consider before starting a payment plan

For those who are not accustomed to Australian law yet or are new to the country, let us teach you some basics.

  • You must pay the tax you owe in full payment and on time.
  • If a person has multiple tax debts and hasn’t paid on time then the plan will fall in default. You will need to pay one full tax debt on time and then follow a payment plan.
  • GIC will be applied until the debt is fully paid.
  • Any refunds or tax credits will be added to reduce your tax debt without changing or replacing your payment plan.
  • Furthermore, if you want to add any voluntary payments at any time, you are free to do so.
  • You are obliged to lodge your activity and tax return statements in order to pay any associated liabilities. 
  • If you are following a payment plan to fulfill your previous tax debt, any new debt is paid in full payment and on time. Otherwise the current payment plan will get into default.

How to set up an ATO payment plan?

Some of you might be wondering, why opt for an ATO (Australian tax office) payment plan? Right? 

Well, if you owe a BAS or income tax debt, you need an ATO payment plan for quick recovery. Because, if you will not be able to submit your tax debt, the ATO will look whether the business you are running is worth remaining open or not. 

So, it is important to lodge an ATO payment plan and get accustomed to its policies (we will elaborate about important ATO tax debt policies as well in a later section).

Tax Debt payment

Details about your Circumstances

The first step is to inform the ATO about your financial circumstances like;

  1. Your salary, dividends, royalties, interest and rent etc. 
  2. Why can’t you pay the full amount now.
  3. Steps you have taken to pay the full debt.
  4. Your expenses which includes; transport grocery, bills, education, childcare, clothing, personal care, electronic media (mobile phones, TV, etc).
  5. Your bank balances.
  6. Your assets, properties or lands etc.
  7. Your income (business) for the last 3 months.
  8. Business expenses over the previous 3-4 months.
  9. Any other cash flow information (whether your business is seasons or full time).

ATO payment plan policies

If you owe a debt of more than $100,000 and less than $200,000, you can set up an automated ATO payment plan on your mobile phones. Let’s have a look at the primary guidelines which will help you in setting a plan.

  1. The maximum payment term is 2 years. The ideal time period is 18 months. One can extend the time period if facing a severe financial crisis.
  2. Your all circumstances (financial and personal) must be lodged into the data and it supports you for tax debt.
  3. All your financials must be lodged in the ATO for the current financial year.
  4. You must update your BAS and other tax obligations in ATO.
  5. In order to enter the ATO payment plan, a 20% upfront payment will be required.
  6. Last but not the least, superannuation debt holds severe and quick action by the ATO.
  7. ATO charges 3.5% interest rate on giving the payment plan.

These are the basic and primary steps needed to follow for a payment plan. However, the risks vary from person to person, i.e; individuals vs sole traders vs companies. ATO offers easy installments depending upon your financial status.

Now the question arises, what would be the eligible criteria to opt for an ATO payment plan? Intrigued to know? Let’s find out.

Tax Debt payment

Eligibility criteria to opt for payment plan

If your business turnover is less than 2 million dollars annually, then the payment plan will be interest-free. 

  • No default payment plan (previous).
  • Who can’t take loans from normal businesses and channels.
  • Who can demonstrate ongoing viability. 
  • Who has a good payment and lodgement history.

Furthermore, those small businesses who owe activity statement amounts have interest free plans over a time period of 12 months.

How does the payment plan work?

Once you have filed all the terms and conditions to the ATO which we have mentioned above, the next step is to agree with the final terms. Being an Australian, I know how strictly the laws and rules are applied here and I would recommend you to follow the rules strictly as well.

The ATO plan is about 12 months (usually) and you must agree to that. The tax owed amount should be paid in this time period otherwise interest will be applied. One can easily pay the tax debt in installments without worrying about any pressure from ATO.

You can pay via debit card, online services and with BPAY. In addition, you can make changes to the payment plan in accordance with your convenience. 

You May Like HECS Upfront Discount:


The maximum time period to pay a tax debt is 2 years. The time period can be extended depending upon your financial conditions and your previous records. Apart from that, the time period required to file for a tax debt payment plan in ATO is 21 days once you receive a bankruptcy letter.

ATO offers an online payment plan estimator which helps you to pay the debt easily with a proper schedule and how much interest will be applied as per your financial status.

If you can’t pay your yearly income tax on time, then opting for a payment plan to submit the owed money in chunks would be the best suitable option. You can file a payment plan via online apps like mygov app and other online services. 

Final Verdict

Opting for a tax debt payment plan is the best thing one can do in order to save himself from bankruptcy and financial crisis. And, once you have made an entry in the payment plan especially of ATO, then it would be a must to stick to it. 

Moreover, small businesses who make a revenue of less than 2 million dollars have the opportunity to lodge an interest free payment plan. Other than that, 3.5% (latest) interest rate is applied if one doesn’t follow the payment plan strictly.

We hope that now you are well accustomed to the whole ATO payment plan, its terms, conditions, policies and how it works. Still, if you are having any confusion regarding filing a payment plan, you can ask us. We have an experienced team that will help you achieve your desired answers. 

Happy reading. 

Read Our Some Of Previous Articles:
(HECS Borrowing Capacity)
(Different Types Of Taxes)
(Pay As You Go Installments)
(Tax Return Mistakes)
(Public Ancillary Funds)
(Different Types Of Taxes)

Information and statistics for This Post provided by My Tax Daily.

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