Can ATO tax debt be written off?

The short answer to this is NO. The ATO simply does not write off primary (core) debt. And they don’t do “deals” on primary debt.

The (sort of) exceptions to this are:

• bankruptcy or liquidation, when the ATO is considered a creditor the same as any other entity that is owed money
• if it is uneconomical to pursue the debt – if the ATO deems that the individual or entity has (and will have) no way to pay (and they have tried other methods of recovery such as garnishee notices or DPNs).

However, they also can and will re-raise your debt in the future if the debtor shows income or assets that make the debt payable through a recovery action. And, any future credit or refund you might receive can be applied to reduce your debt including other Australian Government agencies.

 So what can be “written off”?

If you are even a day late on your ATO tax debt payment, general interest starts to accrue on your debt. Currently, rates applied are over 7% and compound daily. Your overall debt can comprise a number of elements: the primary debt, penalties charges, general interest (GIC), shortfall interest (SIC), and late payment interest owed.

The interest rates and penalties applied by the ATO means that overall debt really can add up fast. In some circumstances, the interest and penalties can be up to double the primary/core debt!

Individuals and entities such as small businesses, SMSF’s, not-for-profits, strata and co-operatives, with turnover under $10million could be eligible for penalty relief.

In actual fact, if the circumstances around the original debt fit the ATO’s criteria, almost anyone could be eligible for a refund of the penalty and interest charges that have been accrued on the core debt.

How do I know if I could get a refund?

At Tax Assure, we review the full ATO history for every client we work with. We work through any interest or penalties that have been applied – even if these amounts have already been paid. And we work hard to understand the circumstances around the debt so we know if there are grounds to apply for a refund.

This means we can ensure we make the best possible application for interest and penalty refunds, with the maximum chance of achieving a 100% remission (refund) – which will either reduce current debt or can even result in a credit.

So while primary tax debt cannot be written off (if you’re at least semi-solvent and trading), there is a huge benefit in talking to us about possible refunds of interest and penalties.

We have an amazing track record of achieving 100% refunds for our clients.

At Tax Assure, we conduct the ATO review at no cost. And in the case of penalty and interest refunds, you don’t pay anything unless we are successful in negotiating that refund for you.

If you or your clients have ever had ATO debt, we’d love to help you find out if you could be due a refund of your penalty and interest amounts. So please get in touch!