What is a tax debt?
When you have tax to pay, it's important that you pay it in full and on time. If you don't pay, we will apply general interest charge on your unpaid amounts.
Tips to prevent a business tax debt
Preventing debt helps keep your business on track. Businesses that keep on top of their tax and super obligations are more likely to build strong financial resilience and long-term success.
Media: Good cash flow management
https://tv.ato.gov.au/ato-tv/media?v=bi9or7ork5i5qcExternal Link (Duration: 00:15)
Follow our top tips so you're always ready to meet your tax and super obligations:
- Use digital tools and software that are designed to meet the needs of businesses to automate and streamline your business operations. For example, some tools can automatically calculate your live tax position as well as develop reports for GST, so you can spend less time on administration.
- Set aside GST, Pay as you go (PAYG) withholding and super from your cash flow so you have the funds available when it’s time to pay. Setting up another bank account for your tax and super, that's separate to your business bank account, could help you with this.
- Pay on time so you don’t incur unnecessary interest charges on any tax debts – you can't claim interest charges incurred on or after 1 July 2025 as a tax deduction.
- Plan ahead by managing your cash flow, so you know when you may expect money to come in and go out, and can better budget for income and expenses.
- Consider switching from quarterly to monthly BAS lodgment. Reporting GST monthly can help you improve your cash flow and keep your record keeping up to date. It may make it easier for you to track your finances and business performance, stay on track with smaller, more manageable payments, and save you time by aligning better with your reconciliation processes.
- Keep complete and accurate business records. Make sure you update them regularly (for example, every week or month) and remember to back up your digital records regularly too.
- Seek advice from a registered tax professional. They can give you advice that's tailored to your circumstances and help you manage your tax and super.
Free resources to help you get it right
It's important to have a good understanding of your payment obligations so you can plan ahead and pay the correct amount at the right time.
You can increase your cash flow knowledge by taking advantage of Essentials to strengthen your small businessExternal Link – a learning platform specifically designed for small business. There are lots of free courses, and you can learn at a time that's convenient to you. Our most popular courses include:
- Goods and services tax (GST)
- Cash flow for small business success
- Strategies for improving your cash flow
- Considering your small business viability.
You can also use the Cash Flow KitExternal Link to build your cash flow skills and knowledge.
For more information, resources and tools to help you get it right, see:
Budgeting for tax as an individual
If you're making money outside of your salary or wage, budgeting for your income tax obligations can help avoid a large tax bill when you lodge your tax return.
Keep the right amount aside to cover tax whenever you receive a payment that hasn't been taxed, such as:
- income as a contractor
- profit from selling shares, property or crypto assets (capital gains tax may apply)
- rental income
- interest and share dividends
- sharing economy payments.
You can use our income tax estimator to work out if you're likely to owe tax this income year.
If you have a study loan, you can make voluntary repayments (on top of any compulsory repayments) to reduce the balance of your loan.
Making prepayments
You don’t need to wait for a bill from us to make a payment. You can make prepayments at any time, and as often as you like, to make it easier for you to manage your tax.
What you need to do:
- find your unique payment reference number (PRN)
- choose the amount you want to prepay
- prepay your tax using one of our payment methods.
We will hold prepayments you make towards your expected bill unless you, or your agent, request a refund. However, if you already have an existing debt with us, we may use the prepayments to pay that debt.
If you make prepayments towards certain anticipated tax debts more than 14 days before the due date, you may qualify for interest on early payments.
Pay as you go (PAYG) instalments
Regardless of whether you are a business or an individual, we may automatically enter you into PAYG instalments if you earn more than the instalment income entry threshold. You also have the option to enter PAYG instalments voluntarily to help manage your tax obligations throughout the year.
Starting PAYG instalments, whether by meeting the instalment income entry threshold or by voluntarily entering, means making frequent payments to us as noted on your activity statement or instalment notice.
When you have entered PAYG instalments, we will let you know the details for lodging and paying PAYG instalments, including:
- when to pay
- how often to pay
- how much to pay.
Request a payment transfer
A payment transfer is the movement of a payment from one ATO account to another ATO account if a payment has been credited to the wrong account. You can request a partial transfer where a payment should have been made for 2 different accounts.
To request a payment transfer you need to provide the following details:
- your contact details, including your name and phone number – you must pass proof of identity on the account the payment is being transferred from
- details of the account the payment was made to, including the PRN, account name, tax file number (TFN) or Australian business number (ABN)
- amount of the payment
- payment method – for example, credit card or BPAY
- date of the payment
- payment receipt number (if known)
- tax type – for example income or activity statement
- details of the account that the payment is to be transferred to, including the PRN, account name, TFN or ABN
- details of the amount of the payment to be transferred – you can request a transfer of the whole, or partial amount.
You can request a payment transfer by using:
- Online Services for individuals and sole traders, if you're a sole trader
- Online services for businessExternal Link, if you run a business
- Online services for agents, if you're a registered agent.
You can also contact us during our operating hours.
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