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What to do when you have a Tax Debt

Most taxpayers pay amounts they owe on time or shortly after the due date. For the minority of payments that remain outstanding, the ATO take action to recover the debt.

How the ATO treats the taxpayer when they have a debt is not a linear process. It takes into consideration the taxpayers:

  • Individual circumstances

  • Past behaviour

  • Lodgement and payment history

As a result, two people may have what looks like similar debt circumstances, but they may be treated differently. Not every taxpayer will go through each step of the treatment or approach to debt recovery.

The ATO’s approach includes:

  • Prevention

  • Early action

  • Firmer action

  • Stronger action.


The ATO try to make it as easy as possible for you to pay your tax on time, and prevent you from finding yourself with a tax debt.

They may send you an SMS reminder before payment due dates, and provide convenient online help tools, payment channels and self-serve payment options.

If you respond to their payment reminders by making a payment or by getting in touch, this will be taken into consideration with future interactions.

Early Action

If you do not pay on time, they may take early action including:

  • sending a post-due date SMS

  • issuing a reminder letter

  • telephoning you or your Tax Agent

  • referring the debt case to an external debt collection agency.

The initial contact to the taxpayer about their debt will vary based on their individual circumstances and previous behaviour. For example, you may not have responded to any SMS reminders in the past, but took action after an external debt collection agency referral. In future, their early action for you may start with a referral to an external debt collection agency.

Firmer Action

The ATO have stated that it is only the minority of taxpayers that don’t communicate with them to address their debt. In these cases they will take firmer action to prevent unfair financial advantage over those who pay on time.

The ATO may issue a garnishee or director penalty notice if you fail to:

  • communicate with them

  • work with them to pay your tax debt

  • comply with agreed payment plans.

The ATO will not take firmer action if you are complying with a mutually agreed payment plan.

Stronger Action

The ATO want to work to support viable businesses by providing a level playing field for those who are doing the right thing. If firmer action to recover a debt is unsuccessful, they may take stronger action.

Stronger action is usually legal means including:

  • notice of intended legal action

  • summons

  • statutory demand

  • judgment

  • bankruptcy notice

  • creditor's petition

  • application for winding up

  • insolvency proof of debt.

Please note the ATO will not take stronger action if you are complying with a mutually agreed payment plan.

Support for Taxpayers

The ATO will work with you regardless of your situation. Communication is the key to tackling debt, so ensure you talk to us or the ATO as early as possible to ensure your debt position does not escalate.

NOTE: It is vital that your contact details are up to date so we can ensure that the ATO or our office is able to get in touch with you.

Payment Plans

If you are struggling to pay your tax, a payment plan may be the best option. The ATO have online and automated phone payment services to help you set up a payment plan and pay back your debt by instalments. As your tax agent we are also able to arrange a payment plan for you.


If you are experiencing serious hardship the ATO can provide targeted support using a range of debt relief options, including release from payment in some cases

The most important thing to remember is to ensure your lodgements are up to date and communicate with us and the ATO so we can provide the necessary help to get you through

If you require any help with a tax debt please call us on 07 5502 6673

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