Managing tax debt can be stressful, but the Australian Taxation Office (ATO) offers flexible options to help taxpayers meet their obligations without undue financial hardship. One of the most effective solutions is setting up a payment plan, allowing you to pay off your tax debt in manageable instalments over time. This detailed guide will walk you through the process of establishing a payment plan with the ATO, eligibility criteria, benefits, and tips for managing your payments successfully.
What Is a Payment Plan?
A payment plan is an arrangement between you and the ATO to pay your outstanding tax debt over a set period, rather than in a single lump sum. It provides flexibility in how much you pay and when, helping to reduce financial pressure while ensuring you meet your tax obligations.
Payment plans can cover various types of tax debts, including income tax, GST, PAYG instalments, and penalties.
Who Is Eligible for a Payment Plan?
Most individual taxpayers and businesses with outstanding tax debts can apply for a payment plan. Eligibility generally depends on:
- Your ability to make regular payments based on your financial situation.
- The amount of tax debt you owe.
- Whether you have a history of compliance or prior arrangements with the ATO.
Even if you are experiencing financial hardship, the ATO encourages you to contact them promptly to discuss options rather than ignore your debt.
How to Set Up a Payment Plan with the ATO
Setting up a payment plan is a straightforward process that can be completed online, over the phone, or via your registered tax agent:
1. Online via ATO’s Online Services
The easiest and fastest way is through the ATO’s online services accessed via your myGov account. Steps include:
- Log in to your myGov account linked to the ATO.
- Navigate to the “Payment Plans” section.
- Review your outstanding debts and select the amount you wish to pay each period.
- Choose your payment frequency—weekly, fortnightly, or monthly.
- Submit your proposed payment plan for ATO approval.
Most payment plans are approved instantly if the proposed terms are reasonable.
2. Over the Phone
You can also call the ATO directly on 13 28 61 to discuss your tax debt and negotiate a payment plan. Be prepared to provide details about your income, expenses, and financial situation to help the ATO determine a manageable payment arrangement.
3. Through a Registered Tax Agent
If you use a registered tax agent or accountant, they can liaise with the ATO on your behalf to establish and manage your payment plan.
What Happens After You Set Up a Payment Plan?
Once approved, you will receive confirmation of the payment plan terms, including:
- The agreed payment amounts and due dates.
- The total debt to be paid off.
- Any applicable interest or charges during the repayment period.
- Instructions on how to make payments (e.g., BPAY, direct debit, credit card).
It is important to adhere to the payment schedule to keep the plan active and avoid default.
Benefits of Using a Payment Plan
- Manageable Payments: Spread your tax debt over time, easing financial stress.
- Avoid Enforcement Action: Shows the ATO you are cooperating, reducing risk of garnishees or legal proceedings.
- Flexible Terms: Payment amounts and frequencies can be adjusted if your situation changes (with ATO agreement).
- Interest and Penalty Relief: In some cases, the ATO may reduce penalties or interest if you maintain the plan.
What If You Can’t Meet Your Payment Plan Obligations?
If you experience a change in financial circumstances and cannot meet your scheduled payments:
- Contact the ATO immediately to discuss revising your payment plan.
- Failure to communicate may result in cancellation of your plan and enforcement actions.
- The ATO may require updated financial information to reassess your payment capacity.
Proactive communication helps maintain a positive relationship with the ATO and avoid penalties.
Tips for Successfully Managing Your Payment Plan
- Set up direct debit payments to avoid missed installments.
- Keep a clear record of all payments made.
- Review your financial situation regularly to ensure payments remain affordable.
- Reach out for financial counselling or tax advice if you struggle with budgeting.
Additional Support for Financial Hardship
The ATO offers various support options for taxpayers experiencing severe financial hardship, including deferred payments, penalty remissions, and hardship variations. If you believe you qualify, discuss these options with the ATO or a qualified financial counsellor.
Conclusion
Setting up a payment plan for your tax debt is a practical way to manage your tax obligations without overwhelming financial strain. The ATO’s flexible arrangements help taxpayers avoid penalties and enforcement action while giving you time to pay what you owe. Whether you set up your plan online, by phone, or through a tax agent, the key is to communicate promptly and keep up with agreed payments.
If you are struggling with your tax debt, don’t delay—contact the ATO or seek professional advice to explore your options and regain control of your finances.
