Individuals who find themselves burdened with a substantial tax obligation may contemplate the possibility of negotiating a settlement with the Australian Taxation Office (ATO). It is important to note that the Australian Taxation Office (ATO) does not engage in negotiations about tax debts on a commercial basis.
The proposition of offering a partial payment of 80% of one's tax bill in the immediate moment, accompanied with a warning that prolonged pursuit may be necessary otherwise, is unlikely to be deemed acceptable by the Australian Taxation Office (ATO). Engaging in such a transaction is prohibited.
The authority of the Australian Taxation Office (ATO) is limited to the scope defined by the legislative powers conferred upon it by the Parliament. Parliament prohibits the Australian Taxation Office (ATO) from engaging in business transactions. In order to negotiate an agreement with the Australian Taxation Office (ATO), it is imperative to adhere to the parameters set out by the tax legislation and regulations.
This entails the identification and examination of relevant provisions within tax legislation and regulations that have the potential to mitigate one's tax liability, followed by an assessment of their applicability to one's specific circumstances.
What can be done?
The following are four potential strategies that individuals may consider using in order to potentially minimise their tax liabilities.
Examine the numerical data provided by the Australian Taxation Office (ATO).
One should evaluate their stance on the methodology employed in the calculation of tax debt. It is possible to identify some components of one's tax liability that may be subject to objection, therefore potentially mitigating the total debt burden.
This particular approach is frequently advantageous in cases when a portion of the tax liability has been incurred due to an audit or a default assessment.
Are there any deductions for which you are eligible that were not included in your tax assessment?
Was superannuation paid to employees, but not considered during the superannuation audit conducted by the ATO?
It is advisable to additionally search for instances of duplicate counting. It is crucial to ensure that accurate data are provided when submitting an activity statement subsequent to the Australian Taxation Office's estimations. It is possible to observe that one's tax liability may encompass both the estimated figures provided by the Australian Taxation Office (ATO) in their assessment, as well as the accurate amounts shown in one's tax filings. This situation may arise when the Australian Taxation Office (ATO) fails to adjust the estimated figures subsequent to the lodgement of your tax return. This phenomenon has been seen on several occasions.
If an individual is apprehensive about the possibility of their tax obligation exceeding its accurate amount, seeking professional assistance for a thorough evaluation by an expert in the field can prove to be quite advantageous.
In the event that errors are detected in the ATO's numerical data, the most appropriate course of action often involves submitting an objection.
One may also consider mitigating their debt burden by formally requesting a remission of the general interest charge and/or penalties.
The complexity of these applications necessitates a cautious approach, and it is advisable to use prudence and consult with a qualified expert when submitting a request. In the event that a request is made and subsequently denied by the Australian Taxation Office (ATO), it is important to note that there is no avenue for objection available to the requester. There are certain categories of tax decisions to which objections can be raised, and it should be noted that a decision to not remit a general interest charge does not fall under these objectionable categories.
Engaging the services of a tax attorney with expertise in interest remission claims will enhance your prospects of achieving a favourable outcome.
Submit an application for the alleviation of your tax liability.
Certain tax debts, such as income tax debt, have the potential to be discharged, therefore enabling individuals to be relieved of their financial obligations. It is not possible to exempt oneself from Goods and Services Tax (GST), Pay As You Go (PAYG) withholding, or superannuation obligations for one's employees. Neither a firm nor a partnership may be absolved of any tax liability.
The possibility of obtaining a discharge of tax debt arises when an individual can demonstrate that they would experience significant financial hardship if they were required to fulfil their tax obligations.
The Australian Taxation Office (ATO) takes into account many considerations before to granting tax exemptions or releases. These reasons include:
Whether an individual has made investments or spent their money without taking into account their tax obligations.
If the individual possesses additional financial obligations, such as credit card bills and personal loans, and their ongoing financial distress would persist even if the Australian Taxation Office (ATO) were to provide them relief, it is probable that their severe financial difficulty is of a temporary nature.
In order to be eligible for consideration, individuals may submit an Application for Release.
Please present a proposal for a settlement on your outstanding tax liability.
Tax debts can only be compromised by the Australian Taxation Office (ATO) under highly restricted conditions. The Australian Taxation Office (ATO) website contains a comprehensive 17-page practise statement pertaining to this matter.
In summary, the Australian Taxation Office (ATO) imposes certain criteria that must be satisfied before to considering a compromise on a tax liability. The aforementioned items encompass:
It is imperative that the debt remains undisputed. It is essential to ensure that all tax lodgments are current. The agreement must yield advantages for the Australian Taxation Office (ATO). One potential benefit is the reduction in collection expenses, or the ability to collect a bigger sum than what the ATO would otherwise be able to recover. It is important to note that the compromise figure you propose must be lower than the total value of your nett assets.
The Australian Taxation Office (ATO) is unable to endorse a settlement that is only justified by the argument that an individual would experience financial distress if they were required to settle their tax liability.
Prior to considering a compromise, it is anticipated that all alternative choices would be thoroughly examined.
According to the research conducted, it has been shown that the Australian Taxation Office (ATO) gets a very limited number of offers of compromise annually, estimated to be around 30. The stringency of the criteria and the comprehensive nature of the application procedure contribute to this outcome.
Engaging with the Australian Taxation Office (ATO)
If an individual is encountering difficulties with a tax debt, it is advisable to seek the assistance of a tax professional to evaluate their tax situation. Professional advisors has the ability to discern elements of one's indebtedness that may be subject to dispute, therefore aiding individuals in adopting an appropriate strategy when engaging with the Australian Taxation Office (ATO).