Small Businesses: Is the ATO coming for you? 

By Hilary O’Dwyer, CEO, Titian Consulting

Thanks to the craziness of the last few years for businesses, especially small business, the ATO has not chased anyone for outstanding BAS, but this time is now over.

Over the past two years with the impact of the pandemic hitting businesses, the ATO focussed on delivering the relief available such as JobKeeper rather than chasing money owing.

Of my clients who have outstanding amounts, they hadn’t been approached by the ATO and it seemed to be that so long as something was getting paid regularly, no one was doing any chasing.

Now that things have settled into what we could call a new normal, the ATO have switched back to their legitimate approach of getting what is owed and have been tapping businesses on the shoulder looking for payment. 

This can be difficult, especially for businesses in sectors such as hospitality who are desperately trying to keep their businesses afloat. But even if you are in this situation, all is not lost and it’s not a time to panic. As always, the ATO can be very accommodating; especially with businesses that are proactive with them. 

Dealing with Debt 

Businesses need to get serious and be on the front foot rather than wait for the tap on the shoulder, as their dealing with the ATO will be easier this way. It’s crucial to manage legacy debt and get ahead. Do you know what you owe? What does the ATO portal say? You want to be confident that your books agree to what is actually outstanding.

Once you know what you owe, you can easily set up a payment plan for legacy debt.

The key thing with this is to be ahead of the game with it and to be realistic about what you can pay back; considering that all future IAS/BAS must be paid on time and in full for the plan to remain active. If not, then the payment plan is void and the full amount falls due immediately. 

The best way to approach this is to look at what you want to put on a plan and to assess how much you can pay back weekly, fortnightly or monthly and over how many months (the maximum time frame you are allowed is up to 36 months) and consider in your cashflow planning how you are going to pay the next IAS/BAS in full. 

Set Up for the Future 

When getting on top of your ATO payments for the future there are some simple tricks you can utilise to bring more discipline into your cashflow planning. 

  1. For payroll, as soon as you complete a pay cycle you should remit the PAYGW to the ATO straight away. This is tax that belongs to your employees. It’s not part of your working capital.
  2. With receipts from customers, a great way to get ahead of the GST payment is to immediately strip out 1/11 (divide the full amount received by 11) of the receipt and put it in your ATO savings account. This way you will have more than enough GST to cover that component of your return. If you have numerous receipts daily, you can do this exercise weekly by running your cash summary report and picking up your numbers from there.
  3. Similarly, a monthly savings plan for PAYG instalments (your income tax payments) can also be created to cover off on this component, should it be applicable to your business. 

It may take some time to get to the point where you have the money set aside by the due date but it’s worth the effort and will give you great peace of mind.

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