If you don’t pay
We know that taxpayers, in particular small business operators and sole traders, sometimes have cash flow issues meaning they can’t pay their whole tax bill on time.
In the case that a tax bill isn’t paid by the due date, engage with us early so we can help you deal with your debt while it’s still manageable. We have a number of tools and services available to support you to address your bill while it’s still manageable.
We’re committed to listening to your situation and helping you get back on track.
On this page
What happens if you don't pay
If you don't pay the amounts you owe us on time, we will:
We may take stronger action if you are unwilling to work with us to address your debt or repeatedly default on agreed payment plans.
We don't currently refer selected debts to external collection agencies for collection on our behalf, but we may do so for any cases in the future.
Make sure you lodge your activity statements and tax returns on time even if you can't pay by the due date. You'll avoid a penalty for failing to lodge on time and we'll know you're aware of those obligations.
General interest charge
If you don't pay on time, we will automatically add a general interest charge (GIC) to what you owe. Your debt will grow each day your debt remains unpaid.
Interest calculates on a daily compounding basis on the amount outstanding and is added to your account periodically.
We revise GIC interest rates quarterly.
You can generally claim a tax deduction for interest charged in the year it's incurred.
Remission of interest
You can ask us to remit, such as reduce or cancel, some or all of your interest by:
Tell us why you think it is fair and reasonable for us to reduce or cancel your interest charges. Include the circumstances that led to your delay in payment and any steps you've taken to pay what you owe.
If your request is approved, you must include the amount of the remitted interest in your tax return as assessable income in the year it was remitted.
Using refunds or credits to pay debt
If you have a debt with us and you're due to receive a refund or credit such as from an earlier tax return or activity statement, we're required by law to use the refund or credit to reduce your debt. This is what we call offsetting.
Offsetting is where we use a credit or refund from one account to pay off an outstanding or on-hold debt on another account.
We're also required to pay your refund to other Australian Government agencies if you owe them money. For example, if you have an overdue child support payment, part or all of your refund payment may be paid to Services Australia.
Once all your debts are clear, we'll refund any remaining credit to you.
We'll notify you in writing if we use your refund to pay a debt. This type of offset can also be found on your statement of account and in your Online services account with the description Offset.
If you are in serious financial hardship, we may be able to pay the refund to you instead.
External debt collection agencies
Previously we referred some debts to external debt collection agencies for collection on our behalf up to April 2020. Debt cases are currently no longer actioned by external debt collection agencies. However, we may do so for any in the future. Contact us directly on 1300 466 859.
Previous external debt collection agencies we referred to
Debt cases are no longer actioned by Milton Graham as of April 2020.
Debt cases are no longer actioned by Collection House as of April 2020.
Probe Operations Pty Ltd
Debt cases are no longer actioned by Probe Operations Pty Ltd as of 31 December 2019.
Debt cases are no longer actioned by Recoveriescorp as of 31 December 2019.
Previously we wouldn't refer debts to collection agencies when formally disputed. If you had formally disputed your debt after we referred it to an agency, the debt would be returned to us for action.
If you think it's a scam
If you previously received a call from a debt collection agency on our behalf, there are ways to check if it was legitimate, such as check if they asked you to pay by:
- BPAY using the ATO biller code 75556
- a method listed under our How to pay options.
You can also phone us directly on 1800 008 540 to verify they are legitimate.
Disclosure of business tax debt
If you have overdue tax debts and meet certain criteria, you may have your tax debt reported to registered credit reporting bureaus (CRBs). If you meet the eligibility criteria you will receive a Notice of intent to disclose, that will advise you of the relevant action to take.
If you're already engaged with us to manage your tax debts, the debts will not be reported to CRBs.
We're committed to supporting taxpayers who want to do the right thing and preventing those who don't pay from gaining an unfair financial advantage. We use stronger action when people:
- are unwilling to work with us
- repeatedly default on agreed payment plans
- don't have the capacity to pay and don't take steps to resolve their situation
- have been subject to an audit where we detect deliberate avoidance and payment avoidance continues
- appear to be engaging in phoenix activities (using liquidation to avoid financial obligations without risking assets and with the intention of resuming business operations through a new entity).
Stronger action includes:
In some cases, we may take legal action to recover outstanding tax and super debts. The action we take depends on whether an individual (or sole trader), partnership, trust, superannuation fund or company owes the debt and may include:
We can issue a garnishee notice to a person or business that holds money for you or may hold money for you in the future. This requires them to pay your money directly to us to reduce your debt. We'll send a copy of the notice to you.
For individuals, we may issue a garnishee notice to:
- your employer or contractor
- banks, financial institutions and building societies where you have accounts
- people who owe money to you from the sale of real estate such as purchasers, real estate agents and solicitors.
For businesses, we may issue a garnishee notice to:
- your financial institution
- trade debtors
- suppliers of merchant card facilities.
Director penalty notice
Directors can incur penalties equal to their company's
- unpaid PAYG withholding
- net GST (inclusive of luxury car tax and wine equalisation tax)
- superannuation guarantee charge.
We may issue a director penalty notice enabling us to start legal proceedings to recover the penalty.
Direction to pay super guarantee charge (SGC)
We can issue employers with a direction to pay outstanding SGC (or estimates of SGC) within a specified period. When an employer receives a direction to pay, they must ensure that they pay the full amount specified in the direction. A failure to comply with the direction is a criminal offence and can result in penalties or imprisonment.
Claim or summons
If you don't work with us to address your debt, we may file a claim or summons with the relevant court of your state or territory. Once the court recognises the debt owed, we may execute on the judgment debt in a number of ways, including by filing and serving a bankruptcy notice.
If the court imposes judgment debt interest, this amount is not tax deductible.
If you receive a bankruptcy notice, you need to pay your debt or make a payment plan with us within 21 days. If you're unable to do this, we may file a creditor's petition to make you bankrupt. Bankruptcy is a legal declaration that a person is unable to pay their debts. When a person becomes bankrupt, the bankruptcy trustee takes possession of nearly all of their assets and sells them to pay the person's debts.
We won't seek to bankrupt you if it is clear you're able to pay your debt in a reasonable time. If you're facing bankruptcy action, but believe you can pay your debts, you should provide us with clear evidence of your ability to pay.
You can go into bankruptcy voluntarily by filing a debtor's petition with the Australian Financial Security AuthorityExternal Link.
A creditor's petition is essentially an application to the Federal Court or Federal Magistrates Court for a sequestration order to declare you bankrupt. Anyone you owe money to, including us, can file a creditor's petition if you have committed an 'act of bankruptcy' (such as failing to comply with a bankruptcy notice), within the preceding six months.
If the sequestration order is made, you will become bankrupt and a trustee appointed to manage your estate. This usually involves the sale of the bulk of your assets to pay your creditors, including us.
The court will not issue the order if you can demonstrate you're able to immediately pay all of your debts.
We can issue a statutory demand for payment to a company that has not paid its debts. A statutory demand requires the company to pay the entire debt or enter into a payment plan with us within 21 days.
If a company doesn't comply with the statutory demand, we may use the non-payment as evidence that the company is insolvent and apply to the Federal Court to wind up the company.
When a court orders a company to wind up, an appointed official liquidator sells the company's assets and distributes the resulting funds to the company's creditors.
We'll take action to wind up a company if it has failed to pay its debts and we have not been able to negotiate a suitable payment plan. These circumstances may indicate that the company is insolvent and there could be a risk to us (and possibly to other creditors) that the debt will not be paid.
Find out your options if you can't pay on time and what happens if you don’t pay what you owe us.