If you don’t pay

What happens if you don't pay

When you owe tax which you can't pay by the due date, contact us before the due date so we can help you while it’s still manageable.

We’re committed to:

• listening to your situation
• helping you get back on track
• providing tools and services to help with paying.

If you don't pay your debts on time, we will:

• apply general interest charge on your unpaid amounts
• contact you soon after the due date by one of the following methods    
  • SMS
  • messages in myGov
  • letter
  • phone
• use any future refunds or credits to repay the amounts you owe.

We may take firmer action if you:

• refuse to engage with us to address your debt
• continue to ignore SMS and letter reminders
• repeatedly default on agreed payment plans.

Make sure you lodge your business activity statements and tax returns on time to avoid a penalty for lodging late.

General interest charge

If you don't pay on time, we will automatically add a general interest charge (GIC) to what you owe. Your debt will grow each day your debt remains unpaid.

Interest calculates on a daily compounding basis on the amount overdue and is added to your account periodically.

We revise GIC interest rates quarterly.

You can request a remission of some, or all, of your interest. We may remit the interest if you have extenuating circumstances which caused your delay in payment.

Offsetting your credit or refund

If you have a debt with us, including a debt on hold, we're required by law to use any credits or refunds you become entitled to, to pay off the debt. This is what we call offsetting.

There are limited circumstances in which we have the discretion not to offset. You can find out more in PS LA 2011/21 Offsetting of refunds and credits against taxation and other debts.

In some cases:

• we can also use credits you receive from other government agencies to pay off your debts
• we are required to pay your refund to other government agencies you have debt with; for example, if you have an overdue child support payment, part or all of your refund payment may be paid to Services Australia.

Once all your debts are paid, we'll refund any remaining credit to you.

You can check to see if offsetting has occurred on your statement of account or in ATO online services.

External debt collection agencies

If you have an overdue debt and don't respond to our request to pay, we may send you a pre-referral warning letter. If you don’t respond to the letter or engage with us to pay your debt, you will be referred to the external debt collection agency.

If your debt has been referred to recoveriescorp they will contact you to request payment by phone call, email, SMS or letter. If you're not sure whether it's really them, do not reply. You should phone them using the numbers listed to verify the contact.

If you have a registered tax professional they may be contacted on your behalf.

If you're still unsure, you can view our tips on how to verify or report suspected tax related scams.

When we take firmer action

We're committed to supporting taxpayers who want to do the right thing and preventing those who don't pay from gaining an unfair financial advantage. We use firmer action when people:

• are refusing to engage with us
• continue to ignore SMS and letter reminders
• repeatedly default on agreed payment plans
• don't have the capacity to pay and don't take steps to resolve their situation
• have been subject to an audit where we detected deliberate avoidance and payment avoidance continues
• appear to be engaging in phoenix activities; this involves using liquidation to avoid financial obligations (without risking assets) and with the intention of resuming business operations through a new entity.

You can avoid firmer actions by paying in full and on time or setting up a payment plan.

Garnishee notice

We can issue a garnishee notice to a person or business that holds money for you or may hold money for you in the future. This requires them to pay your money directly to us to reduce your debt. We'll send a copy of the notice to you.

For individuals, we may issue a garnishee notice to:

• your employer or contractor
• banks, financial institutions and building societies where you have accounts
• people who owe money to you from the sale of real estate, such as purchasers, real estate agents and solicitors.

For businesses, we may issue a garnishee notice to:

• your financial institution
• trade debtors
• suppliers of merchant card facilities.

Director penalty notice

As a company director, you become personally liable for your company's unpaid amounts of:

• pay as you go withholding
• goods and services tax
• super guarantee charge.

These amounts that you are personally liable for are called director penalties. We can recover the penalty amounts from you once we issue you a director penalty notice (DPN).

We may issue DPNs to directors of multiple companies, capturing the total value of unpaid tax and super across all related entities.

We can recover the amounts of the director penalty by:

• issuing garnishee notices
• offsetting any of your tax credits against the director penalties
• initiating legal recovery proceedings against you.

Direction to pay super guarantee charge (SGC)

We can issue employers with a direction to pay outstanding SGC (or estimates of SGC) within a specified period.

When an employer receives a direction to pay, they must ensure that they pay the full amount specified in the direction. A failure to comply with the direction is a criminal offence and can result in penalties or imprisonment.

Disclosure of business tax debt

If you have overdue tax debts and meet certain criteria, you may have your tax debt reported to registered credit reporting bureaus (CRBs). If you meet the reporting eligibility criteria, we will send a Notice of intent to disclose that advises you of the relevant action to take.

If you're already engaged with us to manage your tax debts, the debts will not be reported to CRBs.

When we take legal action

In some cases, we may take legal action to recover outstanding tax and super debts. The action we take depends on whether the debt is owed by an individual (or sole trader), partnership, trust, superannuation fund or company.

Claim or summons

If you don't work with us to address your debt, we may file a claim or summons with the relevant court of your state or territory. Once the court recognises the debt owed, we may execute on the judgment debt in several ways, including by filing and serving a bankruptcy notice.

If the court imposes judgment debt interest, this amount is not tax deductible.

Bankruptcy notice

If you receive a bankruptcy notice, you need to pay your debt or make a payment plan with us within 21 days. If you're unable to do this, we may file a creditor's petition to make you bankrupt.

Bankruptcy is a legal declaration that a person is unable to pay their debts. When a person becomes bankrupt, the bankruptcy trustee takes possession of nearly all their assets and sells them to pay the person's debts.

We won't seek to bankrupt you if it is clear you're able to pay your debt in a reasonable time. If you're facing bankruptcy action, but believe you can pay your debts, you should provide us with clear evidence of your ability to pay.

You can go into bankruptcy voluntarily by filing a debtor's petition with the Australian Financial Security AuthorityExternal Link.

Creditor's petition

A creditor's petition is essentially an application to the Federal Court or Federal Magistrates Court for a sequestration order to declare you bankrupt.

Anyone you owe money to, including us, can file a creditor's petition if you have committed an 'act of bankruptcy' (such as failing to comply with a bankruptcy notice) within the preceding 6 months.

If the sequestration order is made, you will become bankrupt and a trustee appointed to manage your estate. This usually involves the sale of the bulk of your assets to pay your creditors, including us.

The court will not issue the order if you can demonstrate you're able to immediately pay all your debts.

Statutory demand

We can issue a statutory demand for payment to a company that has not paid its debts. This requires the company to pay the entire debt or enter into a payment plan with us within 21 days.

If a company doesn't comply with the statutory demand, we may use the non-payment as evidence that the company is insolvent and apply to the Federal Court to wind up the company.

Wind-up action

When a court orders a company to wind up, an appointed official liquidator sells the company's assets and distributes the resulting funds to the company's creditors.

We'll take action to wind up a company if:

• it has failed to pay its debts
• we have not been able to negotiate a suitable payment plan.

These circumstances may indicate that the company is insolvent and there could be a risk to us (and possibly to other creditors) that the debt will not be paid.