Not everybody has been so fortunate to get themselves a tax refund this year. Some people have actually had a tax debt and that tax debt has been a lot more than they expected, more than they can pay by the due date in November this year.
Now if you’re in this situation I want you to know that you don’t need to stress just yet. In this week’s episode, we investigate some solutions available for you.
Pay along the way
The first thing you can do is start paying your Tax Debt every time you get paid via a direct EFT.
Then when the debt is nearing to be due, you can request a payment plan from the ATO for the remaining amount.
I have a Tax Agent
Now if you have a tax agent you can get in touch with them and explain your situation and ask to get a tax repayment plan with the ATO.
You’ll have to know how much you can pay either weekly, fortnightly, monthly.
I did my own Tax this year
But if you’ve done your own tax this year – you can still get a payment plan with the ATO and it’s not as daunting as it may seem.
You do need to call the ATO on 13 28 61, follow the prompts to identify yourself and then select option 4.
Before you call, there are a few things you need. These are:
1. Identify yourself
You need to have your name, date of birth and a document reference number, such as the reference number on your notice of assessment.
2. Repayment Request
If you can pay your debt in one lump sum but after the due date, you can request an extension to pay.
If you can’t pay it in one lump sum, but you can repay over several months, then you will be asked if you can pay weekly, fortnightly or monthly.
It’s best to estimate how frequent you can repay and much you can afford in each repayment before you call the ATO.
Note, the ATO will request you pay your debt within 12 months.
What frequency do I choose for repayment?
We recommend you select the frequency of repayment that correlates to your being paid your wage.
So, if you’re paid on a weekly basis we recommend that you pay your debt on a weekly basis with the ATO.
This is because when you get paid, you will automatically setup in your internet banking a repayment to the ATO. This amount will be small in comparison to your wage, and you shouldn’t really notice the repayment.
How to calculate the estimated repayment?
STake your tax debt and you divide it by how many periods there are in the next 12 months.
Weekly = 52 weeks
Fortnightly = 26 weeks
Monthly = 12 months
Say your debt is $1,000 and you’re paid weekly. To repay that debt over a 12 month period would be $19.23 per week (i.e. $1,000 / 52 weeks) plus interest.
This will be an estimate only, because you will be required to pay interest on the debt.
How is the General Interest Charge calculated?
There is an interest charge involved in getting a tax repayment plan, around 8.7% per annum.
The rates are updated each quarter on the ATO website here.
It’s not a lot, but it is interest that you will have to pay and if you are a good citizen and you pay your tax repayment pan on a regular basis, then you can potentially ask for that interest back at the end of the debt, but you can’t expect that that will happen.
Are there anyongoing requirements?
Going forward, the ATO will expect you to comply with your tax lodgement requirements by the due dates. That means that you have to ensure that your tax returns are lodged on time and that your debt is paid on time.
Strategies to avoid tax debt in future
1. Request extra tax deducted from wage
If your employed, ask your employer to take a little bit of extra tax out of your wage each pay period.
2. HECS / HELP debt
If you have got that tax debt because you have a HECS or HELP Debt, check with your employer to ensure that they have “switched on” the HECS and HELP debt button on their payroll system for your employee file.
These strategies will ensure that you are getting the right amount of tax withheld as and when you work.
3. Check deductions with a Tax Agent
If you’re doing your tax online, you might want to go and see a Tax Agent as there may be some deductions that you didn’t know you could claim and you don’t need a tax debt in the future.
So there you have it, that’s how you get a tax repayment plan and a couple of strategy’s to ensure that next financial year you may not have a tax debt
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