Payment arrangements are a common way for taxpayers who are having trouble meeting their tax obligations to get back on track. The ATO has received a lot of positive feedback from tax agents about how useful payment arrangements can be. However, defaulted arrangements can be a problem.
Why and when clients default on arrangements
Payment arrangements default when the balance of your debt is more than the ATO expects on a given date.
This is different from a cancelled arrangement. The ATO cancels an arrangement when a client, who already has an arrangement, contacts them because their circumstances have changed and their arrangement is no longer suitable. The ATO then cancels their old arrangement and enters a new arrangement with them.
The clients’ payment needs to reach the ATO on or before the due date to avoid a defaulted arrangement. Different methods of payment have different processing times, so it’s important that clients use a payment method that suits them and they are familiar with the processing times. Payments they make by BPAY, for example, can take up to three working days to process.
What defaulting on a payment arrangement means
The ATO encourages taxpayers who are having trouble keeping up their payment arrangements to contact them early to discuss their circumstances. By doing this, they can avoid having a defaulted payment arrangement.
Of course, the ATO needs to maintain a level playing field so that taxpayers doing the right thing are not disadvantaged. That’s why, when they talk to taxpayers, they look at their individual circumstances including their compliance history. When they look at their compliance history, they take into account a defaulted payment.
For more information, visit www.ato.gov.au
There are a range of tools and resources, including a payment arrangement calculator, to help taxpayers address their tax debts in line with their circumstances.
The online payment arrangement calculator can be used for debts of $25,000 or less. To access it, visit www.ato.gov.au and select Find a rate or calculator then Payment arrangement calculator.