In tough times, the taxman can help

The wash-up of this economic rough patch may include tax consequences, but TERRY HAYES reminds business that the tax office is not blind to suffering.

By Terry Hayes

The wash-up of this economic rough patch may include tax consequences, but business should remember that the tax office is not blind to suffering.

In a climate of rising interest rates, rising inflation, more costly borrowings, and a highly competitive economy, small and medium sized business owners are facing pressures from many sides. Coupled with this is the need to keep on top of their tax obligations, including paying tax bills on time.

If cash flows become squeezed, a business can look for ways to alleviate that problem and it may be tempting to delay a tax payment or two – but that is dangerous. It’s better to seek help and at least advise the tax office of your problems. The taxman is not blind to suffering and is prepared to consider individual circumstances.

Here is a real life example from the tax office itself.

Mike, a sole trader in regional Queensland, had a problem. His business partner unexpectedly left the business. In addition, due to the closure of a major employer in the area, Mike was struggling to run his business and stay up-to-date with his tax obligations and payments.

He was making regular payments off a recent tax debt, but the added interest meant his debt was not reducing as quickly as he would have hoped. This was all putting a strain on Mike and his business.

So Mike contacted the tax office. After considering his compliance history and individual circumstances, the tax office remitted the interest that had accrued over his period of difficulties. It also negotiated a payment arrangement based on the tax instalment amount he was already paying.

With the accrued interest gone, Mike was now in a position to repay his tax debt much earlier than he’d originally anticipated, and to get on with his business. The tax office got the tax payments and Mike was still in business.

The moral of the story is clear – keep the taxman in the loop about any problems you are having in paying your tax liabilities. He is prepared to help.

In another example cited by the tax office, it was able to help a drought-stricken farmer with his tax payments through the tough times.

Prompted by a third-generation farmer suggesting they come and see the effects of the drought first-hand, three tax officers left their Adelaide office to visit the farmer in the Northern Flinders Rangers.

The farmer owned a 1.5 million hectare cattle station. However, crippled by debt, he was now working the land on his own as his wife and children had to leave the farm six months earlier. He was doing it very tough.

The farmer provided the tax officers with a first-hand account of how the drought was affecting him, his family and his community.

While the tax office is not in the business of running farms, it was able to help by giving more time to lodge and pay income tax and activity statements. It will also help those in similar situations get their refunds quickly.

In short, the tax office does consider individual circumstances, but it does need to be made aware of them. Sure it is there to collect the revenue, but businesses need to be aware that the tax office can help taxpayers who face problems with their tax obligations.

In tough times, the taxman can help, but remember it is a two-way street. If a business has a history of late tax payments or lodgements, or has outstanding lodgements or outstanding tax not paid, the tax office will take that into account in working out how it can help. That’s not to say it won’t help, but… you get the picture.

Terry Hayes is the senior tax writer at Thomson Legal & Regulatory , a leading Australian provider of tax, accounting and legal information solutions.

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