We were recently referred a client who owed approximately $232,000 in income tax. The client’s accountant had sought to negotiate a reduction of the tax debt with the ATO, however, negotiations had been largely unsuccessful.

Our engagement and background information

We were engaged by the client and obtained the following general information:

  • She was over 50 years old with three children, two of which were dependants.
  • She was born overseas and English was her second language.
  • She had never been employed in Australia, however, had received distributions from her husband’s business.
  • She had been entirely reliant on her husband to manage her family’s financial and taxation affairs

Our client had failed to lodge income tax returns for many years and was subject to an ATO audit. She had been unaware of her non-compliance with lodging income tax returns as she had been reliant on her husband to manage the family’s financial and taxation affairs. She was fully compliant with the ATO audit and a significant debt to the ATO resulted. The debt including interest and penalties was currently over $230,000.

Our client owed further debts to creditors totalling approximately $45,000 and she owned a property which had approximately $180,000 equity in it.

Our client’s tax debt

Our client’s core tax debt was approximately $158,000. However, because of interest and penalties raised it had increased to nearly $290,000. Our client had been making some payments towards the debt which had reduced it to approximately $232,000, however, she was unable to ultimately pay this amount given funds available to her.

Options available and negotiations with the ATO

Our client could not pay the debt she owed to the ATO which was approximately $232,000 and her other debts which totalled approximately $45,000. Her only realistic options therefore were to negotiate a reduction of the ATO’s debt and enter into a payment arrangement or if that was unsuccessful, file for bankruptcy.

We summarised our client’s financial position for the ATO and advised the ATO that our client could not pay them and if no settlement could be agreed to she would have to file for bankruptcy. We also advised that in bankruptcy the ATO would receive significantly less than the amount it was claiming against our client.

Payment arrangement agreed to

After various negotiations with the ATO including providing the ATO with further information, our client’s tax debt was settled on the basis that:

  • The ATO agreed to remit interest and penalties totalling nearly $114,000 which left our client owing approximately $118,000.
  • The ATO agreed to allow our client to pay the remaining debt she owed by way of instalments of $5,000 per month for a period of approximately two years. The payments to the ATO were ultimately to be paid from profits from our client’s husband’s business.

This was obviously a great outcome for our client as it meant she only had to pay approximately half of the debt which the ATO were chasing her for when she engaged us. It also meant that she avoided bankruptcy and was able to keep her house.

Contact us for Advice and Assistance

If you need to negotiate a payment arrangement with the ATO, or if you or your business are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help with a free, no-obligation consultation, so contact us here.


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Tax Debt Solved
GPO Box 691
Brisbane Qld 4001

Email: mail@taxdebtsolved.com

Fax:  07 3221 8885
Phone: 07 3221 0055

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