Quite often as tax agents, our role is to liaise with the Australian Tax Office on behalf of our clients to apply for General Interest Charge (GIC) penalties to be reduced or waived, and to arrange payment plans for tax liabilities or other tax-related debts.

For quite some time, the ATO has been understanding and accommodating of  the plight of (mostly business) taxpayers, but we've recently seen the tide changing in the ATO's level of tolerance for such requests.

In short, tax agents like The Peak Partnership are being told to adjust their (and their clients') expectations around payment plans and penalty remissions as the ATO toughens its approach to tax debts. The ATO has said that too many tax professionals are looking to secure payment plans and penalty remissions for clients when their clients are not in “genuine need”.

Speaking through a webinar earlier this year, ATO Assistant Commissioner Lodge and Pay, Sylvia Gallagher stressed that payment plans were not a loan to businesses and were only intended for those that needed genuine support.

“We expect those who can and do pay on time to do so. I listen to a lot of phone calls and watch a lot of processing and there’s an expectation that payment plans will be granted and that they will be three-year payment plans and the minimum amount of payment for pretty much each of the clients that tax agents call up for,” said Ms Gallagher.

“That may have been okay during COVID but that’s not okay anymore. A payment plan isn’t there as a loan. It’s not there for businesses who actually can pay and lodge on time to help them keep that money in their account.”

Ms Gallagher said payment plans will only be granted where the taxpayer can’t pay on time.

“Paying tax isn't voluntary. It is something that is an obligation for all Australians who earn an income,” she said.

She also stressed that the ATO expects those who can lodge on time to do so and before the due date and those who can pay on time to do so.

“So, we will be more stringent in asking questions about capacity to pay and we will be more stringent in looking at General Interest Charge (GIC) remissions,” she warned.

“We’re getting a lot of tax agents call up and say their client has paid off payment plans and are then asking for a GIC remission. Well, why? [The fact] that the payment plan was paid off is not an excuse to get a GIC remission.”

Ms Gallagher said by allowing GIC remissions for those who chose not to pay on time, the ATO would be creating an uneven playing field.

She noted that PS LA 2011/12 sets out in what circumstances it is reasonable for the Tax Office to grant a GIC remission.

“We absolutely will in those cases. [We look at factors such as] did the client have control over the late payment? If they didn't, then obviously we can remit. But also did they make steps to reduce the payment? Is it fair and reasonable to be able to grant that remission as well?” she asked.

The ATO’s collectable debt has now reached more than $50 billion.

“Small businesses make up the majority of that debt, around 90 per cent. So we do want to make sure that we can help businesses get back on track,” she said.

“It is really important that lodgements and payments are up-to-date so that we can understand where a business might be struggling and we can go out and help them.”

From a tax agent perspective, we'll continue to support our clients by applying to the ATO for payment plans and penalty remissions. An important part of that process for us is communication – understanding where your business is at regarding capacity to pay tax-related liabilities, and being able to pro-actively engage with the ATO on your behalf.

If you think you or you business may have difficulty paying the ATO on time, please let your Accounting Adviser at The Peak Partnership know about it as soon as possible. Remember, we're here to help.