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Supporting people in financial distress
The economic downturn has directly affected the viability of businesses and other taxpayers, placing some in serious financial distress. The government has provided us with additional funding over the next four years to increase our support for people and businesses to meet their reporting and payment obligations through earlier contact and more targeted assistance programs.
Historically, micro businesses are the most vulnerable to deteriorating economic conditions. During the last major economic downturn in the 1990s, taxable income of micro businesses fell by over 40% and there was a 25% higher micro business company exit rate, with those of low profitability most at risk. Many of the businesses affected were unincorporated entities, which often resulted in personal assets, including property, being put at risk.
Based on this experience, we are providing a range of practical support for businesses and others aimed at assisting them during the tough times and keeping them engaged with the tax system wherever possible. Keeping viable businesses and people in the tax system also supports returning the Budget to surplus as income levels improve. This would be much harder to achieve had people and businesses begun operating outside the system.
Our practical assistance may include:
- fast tracking refunds
- giving businesses more time to meet activity statement and other lodgment obligations without penalties
- allowing extra time to pay tax debts without any general interest charge
- allowing taxpayers to pay their tax debt by instalments over an extended period of time
- remitting penalties and interest.
In June 2009, the Commissioner announced a range of new measures to help micro businesses having difficulty paying their tax debt. These include:
- Twelve month interest free payment arrangements
We are providing a 12 month general interest charge (GIC) free payment arrangement for businesses with turnovers of up to $2 million which are struggling to meet their obligations. In many cases these businesses will be facing a significant loss of income or be unable to access affordable credit as a result of the economic downturn.
- Interest-free deferral of the payment due date on activity statement liabilities
We are also providing a deferral of the payment due date on activity statement liabilities. This initiative aims to provide relief to businesses facing financial difficulties while keeping them in the tax system.
- Cash flow relief for business - pay as you go (PAYG) instalments
The government announced in the Budget that it will provide cash flow relief for small business by reducing PAYG instalments for the 2009-10 income year. It will apply to all taxpayers who pay quarterly PAYG instalments based on their previous year's tax adjusted by GDP growth (that is, clients who have chosen the amount option).
- Cash flow relief for business - GST quarterly instalments
Consistent with the reduced uplift factor for PAYG instalments, and having regard to economic forecasts and the difficulties facing many businesses, the Commissioner is reducing the GDP uplift factor used to calculate GST quarterly instalments1 for the 2009-10 income year to 2%.
- PAYG instalment variations
We encourage people to vary their instalments downwards in line with their likely end-of-year tax performance. People can be confident that the variation shortfall penalty will be remitted if reasonable steps are taken to get the variation right.
We have developed some new online resources to help taxpayers experiencing payment difficulties. Our web page, 'Economic downturn - frequently asked questions,' provides taxpayers with a single point of reference for questions about the downturn. We have also developed an online calculator allowing taxpayers to calculate various scenarios for meeting their tax liabilities. The calculator assists taxpayers to create a proposal for an affordable payment arrangement with us.
We are complementing our direct assistance programs by supporting a range of businesses and community organisations that provide assistance to people facing financial and related difficulties.
The earlier we engage with taxpayers, the better the chances of finding a suitable solution. We encourage businesses that are struggling to contact us early to discuss assistance options.
Sections within Individuals
Last Modified: Wednesday, 5 August 2009