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Tax Debts

The Right Approach To Tax Debt

Tax debts can be overwhelming, especially if you are unable to keep up with your tax obligations. If you find yourself thinking that your tax issues are a small problem that you know you will fix soon, chances are that will not happen and you will have serious tax debt issues. Keep in mind that there are time limits to get  your taxes in order. And, of course, tax debts and tax evasion are two very different issues!

Unable To Service Tax Debt

Many companies, sub contractors and small business operators in Australia find it difficult to pay their tax debts. We have spoken to many that have not lodged a tax return for some years as they have not had the money to pay for taxes. This can then lead to a tax return not being lodged in the hope that next year will improve and all tax debts paid. Unfortunately, the ATO has a different view of such matters. Under tax law it is an offence to not pay tax on income earned.

Contact The ATO

We advise clients to contact the ATO and ascertain if they will accept an instalment plan for your tax debts, allowing you to catch up and avoid further penalties and charges. Usually by the time we speak to people, they are beyond this initial stage and the tax debt is unmanageable and the ATO has summoned them to court for tax evasion.

Voluntary Bankruptcy Or Company Liquidation

Tax debts can be written off under Voluntary Bankruptcy or a Company Liquidation (after which it becomes the directors personal liability if the reporting was not up to date).

If you apply for your Voluntary Bankruptcy early enough, the court hearing might not take place. That said, the Voluntary Bankruptcy has to have come about through genuine financial difficulties and an inability to pay bills. A1 Debt Assistance can save you time and money by working out a tax estimate for you. This way you do not have to bring your taxes up to date. In most sole trader business structures you may be able to continue in your business and get a fresh start in regards to the written off tax debts. There are some restrictions which you will need to be aware of whilst operating a business as a bankrupt, but it is very fair and manageable.


We can prepare all required government bankruptcy documents and lodge these on your behalf. A1 Debt Assistance will also support you for the 3 years of your bankruptcy, thus being in a position to help you with any ongoing questions the ATO or your trustee may have in regards to your tax debts or any other debts after your file has been lodged. In some cases a Company may be able to be restructured into a sole trader business if the director has to enter into bankruptcy to clear the tax debts. We can advise if this is legally sound in your situation and prepare all documentation for your bankruptcy whilst advising on the change over requirements. There are conditions that must be met to be able to achieve this and it may not always be possible to do this. We can explain this prior to your making any decision in regards to engaging our service. The consequences of Bankruptcy are different from one case to another, as each case is specific to the client’s situation or business.

If you are insolvent, the worst thing you can do is create further debt.