When the ATO starts calling in your debts, it can be very stressful. Your business' ability to access credit in the future will be affected when it reaches a certain point - $100,000 and more than 90 days overdue without a payment solution in place. This will affect your business' ability to access credit when it reaches a certain point. There are several common reasons why businesses with tax debts fail to pay enough taxes throughout the year. These include: Inconsistent cash flow is a major issue for small businesses. In periods of high invoice flow, they often don't set aside enough money for tax. In periods of low invoice flow, they can't pay bills or employees, not to mention owing the ATO more money. The tax liabilities of organizations with poor compliance records (or those who don't submit their tax forms) can be large and multi-year at once. It is common for small businesses and sole traders to mix their business and personal finances. Many of them do not have separate business bank accounts. Due to this, it is extremely difficult to monitor cash flow, which voids the money of several tax benefits applicable to both business and personal income, as well as increases personal liabilities. When you start your own business, you need to always set up a separate business bank account from which you will pay yourself a set salary. Become a creditor - This is related to cash flow, but small businesses often have unpaid invoices. As a creditor, they are left in a position where they are not paid in full if their customers go out of business or declare bankruptcy themselves, or if they have to chase their customers for payment. The business is left with a hole in the budget because it has already paid for the materials and staff required to complete the project. Business owners usually incur tax debt on top of their wages and bills as a result of this. What should you do if you have accumulated tax debt? When you have tax debt, you should consult an expert, such as EPAS, to develop a plan for presenting to the ATO. You can negotiate a debt repayment plan that will allow you to re-establish a healthy cash flow and rebuild your business as long as there is a plan and the ATO is committed to helping you recover, so they won't report your business to credit agencies. EPAS is your ideal pathway to business health. From diagnosing the underlying issues that left you in tax debt to forming a recovery plan that prevents it from recurring, we're here to help. Related Blog: Tax Debt: What Causes It?
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