October 18, 2023

Everything you need to know about ATO Payment Plans!

by Illumin8

Your Local Accountant

It's time to talk payment plans, what are they, how do you get one and what do you need to do once you have one? Well, it's all answered right here!

Alright, let’s talk payment plans with the Australian Tax Office! When it comes to paying the ATO tax you owe, sometimes, it might be a bit of a stretch and you’re unable to pay it off in full.

While paying it off in full is the most ideal thing to do (as there are repercussions for having a debt with the ATO, but that’s another blog!), there is another way to pay off your debt in smaller chunks, that’s with a payment plan.  

So, if you need to set up a payment plan, here's a few things to think about like what you need to do before you set one up, what you need to do while it’s running and what having a payment plan means for your business.  

Now stick with us here, I mean you could play your own bingo game with the words “payment plan” “ATO” and “default” if you like. See how you go along the journey.  

What you need to know before you start your payment plan

To start. The ATO can be quite particular sometimes when it comes to your payment plan. If you owe under $10,000, you can sometimes jump online and set up a plan there, however if the amount exceeds that you’ll need to jump on the phone (or we might be able to for you if you're a client of ours...if you ask nicely 😎) in which you’ll then negotiate a plan that works for both the ATO and yourself.

The ATO likes to have payment plans paying off your outstanding debt within 12-24 months at a maximum, so this is a little guide for you when it comes to your outstanding amount. Having a set timeline before calling will always play in your favour with the ATO as well, showing that you’ve thought about this plan already.  

What you need to know during your payment plan schedule

Alright, SUPER IMPORTANT INFO INCOMING. Yeah, capitals, that means it’s really important.  

When you enter into a payment plan for your outstanding debt, that does not take into account any future BAS or tax lodgment debts that may come on to the account.

For example:

If you have a debt of $20,000 with the ATO and jump on a payment plan paying $1000 a month for 20 months, you will need to adhere to this payment plan, while also paying off the next BAS that is due. Say your quarterly BAS was $4000, that month you’ll need to pay that in full, as well as your $1000 plan payment. For a total of $5000 that month. Before returning to your $1000 payments until the next BAS is due.

Still with us? The crux of it is, the debt doesn’t roll in together and you cannot keep adding BAS or income tax debt to your existing debt. Any new debt must be paid in full. If it isn’t....the ATO will default on your plan and you’ll face a tougher task in getting a new payment plan set up! So, it’s INCREDIBLY important that you adhere to the plan you’ve entered. You will be provided with a schedule once the plan is set up so you can follow that. You can set this up to pay manually, or through direct debit each month, week or fortnight depending on what you choose to do.

What happens if you don’t stay on schedule?

The big question! So once you enter your ATO payment plan, you must adhere to the agreed terms, if not, you “default” on that plan.

This means the plan is now gone and your amount returns to being overdue, and the ATO will start calling again!  

It’s extremely important to know that if you do default on your plan, it’s tough to get the same plan back up and going, as the ATO will start to be harsher on your terms (which you don’t want!) so treat your plan as a rare gem that’s one to be protected by paying on time.  

You may also need to bring more capacity to pay details if you have a default on your plan as well.  For more info on the specifics of payment plans, you can jump in HERE and read more!

So there it is! A few things to remember when it comes to ATO payment plans. Of course, you can always reach out to us for a hand or a chat around these ones too! 


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Andrew from Illumin8

If it sounds like we might make beautiful business together, why not get in contact and discuss your accounting and bookkeeping options with our team.

*PLEASE NOTE* We are currently only taking on clients that operate a business at this time. If you are on the lookout for an accountant to look after your individual return, we can connect you to a couple that we think are ace! 

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