Tax Debt

How the ATO uses legal action to collect tax debts from an individual

These are the steps that the ATO takes when it starts legal action to recover a tax debt from an individual (i.e. as a sole trader, an employee, or a partner in a partnership). Different steps apply for a company that owes the ATO a tax debt. When will the ATO use legal action ...

How the ATO default administrative penalty is calculated, and what you can do to reduce it

If you don’t lodge a tax return or statement with the ATO when it is due, the ATO can send you a default assessment or a notice of estimate. This means that the ATO makes an estimate of your tax and charges you that amount. The worst thing about a default assessment or a ...

The ATO’s ‘because I said so’ rule – the conclusive evidence rule

If you find yourself with a tax debt, it is important to know about the conclusive evidence rule. You need to know that a tax debt is not like most other debts. Tax debts have a special status under the tax law. This special status weighs in the ATO’s favour. Usually, if a creditor wants ...

Remission of the general interest charge – the tax consequences

When you don't pay a tax debt on time, the ATO imposes a 'general interest charge' (the GIC). The ATO has the discretion to remit the general interest charge (i.e. remove it from your account). The law is very specific about when the ATO can allow a remission. You should be careful when you make ...

Setting up your sole trader business for success

I help a lot of sole traders to deal with their tax debt. Often, they don't have a system in place to save for tax, and they come unstuck early in their business. Here are 3 steps a sole trader can take to prepare their business for tax success. The sooner you take these steps, ...

The ATO sent a garnishee notice to my bank – now what?

One of the tools in the ATO’s tax debt collection arsenal is a garnishee notice. These can be issued to anyone who owes you money, requiring them to pay that money to the ATO instead. If you'd like to know more about how the ATO uses garnishee notices and who it can issue ...

Departure Prohibition Orders – how the ATO can stop you from leaving Australia by issuing a DPO

The ATO has the power to stop a taxpayer from leaving the country if they owe a tax debt. It can do this by issuing a Departure Prohibition Order. Once the ATO issues a DPO, you cannot leave Australia until the tax debt is fully paid or you reach a settlement with the ATO. DPOs ...

The ATO can report your unpaid tax debt to credit reporting agencies

A few months ago, someone asked me whether the ATO could report a tax debt to a credit reporting agency. I thought “great question!” and wrote an article about it. The answer, at that stage, was “no - not until the ATO has a judgment against you”. My article explained all the reasons why ...
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