What happens if you don't pay
When tax you owe us can’t be paid by the due date, engage before the due date so we can help you while it’s still manageable. We’re committed to listening to your situation and helping you get back on track. We have tools and services available to support you.
If you don't pay your debts on time, we will:
- charge interest on your unpaid amounts
- contact you soon after the due date by one of the following methods
- messages in myGov
- use any future refunds or credits to repay the amounts you owe.
We may take firmer action if you are unwilling to work with us to address your debt or repeatedly default on agreed payment plans.
Make sure you lodge your business activity statements and tax returns on time to avoid a penalty for lodging late.
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 request a remission of some, or all, of your interest. We may remit the interest if you have extenuating circumstances which caused your delay in payment.
You can ask us to remit, some or all of your interest by:
- using a registered agent who can use Online services for agentsExternal Link
- writing to us at GPO Box 9990 in the capital city of your state or territory
- phoning us on 13 11 42 during operating hours – for interest charges up to $25,000.
In your request, you'll need to include the extenuating circumstances that led to the 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.
If you have a debt with us, including a debt on hold, we're required by law to use any credits or refunds you become entitled to, to pay off the debt. This is what we call offsetting. There are limited circumstances in which we have the discretion not to offset. If you are in serious financial hardship, we may be able to pay the refund to you instead.
You can find out more in PS LA 2011/21 Offsetting of refunds and credits against taxation and other debts.
In some cases, we can also use credits you receive from other government agencies to pay off your debts.
In some circumstances, we are 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 paid, we'll refund any remaining credit to you.
An offset transaction can be found on your statement of account and in your Online services account with the description Offset.
We will be recommencing the use of external debt collection agencies. If you have an overdue debt and don't respond to our request to pay, we may send you a pre-referral warning letter. If you don’t respond to the letter or engage with us to pay your debt, you may be referred to the external debt collection agency.
From 29 January 2024, referred debt cases will be actioned by Recoveries Corporation.
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 firmer 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).
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.
Directors can incur penalties equal to their company's
- unpaid PAYG withholding
- net GST (inclusive of luxury car tax and wine equalisation tax)
- super guarantee charge.
We may issue a director penalty notice enabling us to start legal proceedings to recover the penalty.
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.
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, we will send a Notice of intent to disclose that advises 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.
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.
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 several 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 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 6 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 your debts.
We can issue a statutory demand for payment to a company that has not paid its debts. This 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
- 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.