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Writer's pictureKaren Howard

Essential Tips for Negotiating ATO Payment Plans Successfully

Updated: Nov 26

Three images 1 two tradesmen in high viz looking at construction work 2 is dice with the word debt on with money in background 3 is a man sitting with his head in his hands

We’ve put together some essential tips for negotiating ATO payment successfully because the ATO continues to crack down on collecting tax debt. We understand that these negotiations can be daunting. However, taking the right approach and ensuring you are well prepared, means you can successfully negotiate a plan that works for your business. Here are our essential tips and key steps to follow.


1. All your lodgements need to be up to date


To negotiate with the ATO, you will need to ensure that all your lodgements have been submitted. This includes BAS, IAS, GST, superannuation, company returns, and PAYG. The ATO is unlikely to consider a payment plan without current lodgements being up to date. Please note that whilst you are on a payment plan with the ATO, you must ensure that all future lodgements and payments are made on time.


2. Demonstrate your ability to comply with ATO payment plans


The ATO will need to have confidence that your business can make the payments you negotiate. We recommend that you prepare a detailed cash flow forecast or a three-way integrated financial model (income, savings and spending) that demonstrates your repayment ability. Putting this accounting data together shows the ATO that you manage your accounts and finances in a realistic and structured way.


3. Utilised all available financial resources


You will need to show the ATO that you have explored all other avenues for funding your tax debt. For example, resources like working capital facilities, creditor payments, selling stock, debt financing, or equity injections. The key here is to demonstrate that you are not relying solely on the ATO for this financial support in your business.


4. Understand Your Financial Situation


Being transparent and honest about your financial status is critical to negotiating ATO payment plans successfully. The best way to have this understanding of your financial situation, is to conduct a thorough audit. Your audit should include understanding your cash flow, liabilities, and assets. As well as an insight into the reason for your tax debts. Whether this be market factors, or poor business decisions. This gives the ATO greater confidence that your will meet your obligations.


5. Prepare a Strong Proposal


Your proposal should be brief and supported by current financial data. It should also include key details on what you are doing to manage your debts and improve your business performance in the short and long term. Also, let the ATO know what steps you have already taken to resolve your financial issues.


6. Negotiating payment plans effectively


Clear and concise communication when negotiating payment plans is critical. Review your documents and have your notes ready for your call. Explain why the debt was incurred and what measures you are taking to prevent it from happening again. Effective communication can significantly improve your chances of reaching a favourable outcome.


7. Invest in accounting services


Investing in accounting and tax advisory services will still provide you with the best value for your time and money. In the first instance, to avoid being in the situation of having tax debt. And if your business doesn’t run to plan, an accountant can help you prepare the necessary financial documents and provide valuable insights into your financial situation. They can also negotiate with the ATO on your behalf.


Real-World Examples


Example 1


Due to rising materials and labour costs, a large construction company owed the ATO over $400,000. They had also defaulted on a previous payment plan. To avoid more penalties, we helped them to prepare a detailed profit improvement plan and negotiated with the ATO on their behalf. Being transparent about their financial situation and proposing realistic instalment amounts, we successfully secured a new, affordable arrangement with the ATO.


Example 2


A cleaning business had a $320,000 tax debt. We prepared detailed financial models to show the ATO how much of the debt they would recoup if the company went into liquidation because of this debt. By providing this clarity and a plan to improve the company’s financial situation, we were able to negotiate a payment plan with the ATO that allowed the company to continue operating and manage their debt.


What happens if you don’t pay your ATO debt


The ATO has a numerous means at its disposal to reclaim monies owed to it. First and foremost, they want to give businesses the opportunity to inform them of difficulties in making payments. They actively encourage contact as early as possible so that plans can be put in place while debt is still manageable.


Should you be unwilling to connect with the ATO, ignore their communications or default on previously agreed payment plans, they can take stronger action. This includes using external debt collection agencies, issuing Director Penalty Notices (DPNs) and garnishee notices, which can have significant financial implications for you.


Working proactively with the ATO is the most effective way to avoid severe penalties and legal actions, or even liquidation. Ultimately, the ATO does want to see your business succeed!


How can ABA Advice Beyond Accounting help your business?


At ABA Advice Beyond Accounting, we work in partnership with you to help you master your finances. We focus on more than numbers; we look at your business holistically and then provide you with strategic business advice to help you grow profitably. Our service packages with multiple meetings ensure that you have consistent support and personalised coaching to help you manage your cash flow and address business financial challenges.


If you’re struggling to manage your ATO debt and get back on track, and want more assistance, speak to us now. Not a client? No problem, book your free discovery meeting today if you’d like to find how we can help your business flourish.

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