It is that time of the year to forward plan your tax commitments. Having an outstanding tax liability impacts the cash flow of many medical professionals.
If you anticipate a large tax debt that you cannot pay for a while, you should consult your tax adviser and determine if you can arrange a payment plan with the Australian Taxation Office. The other alternative is to obtain either a secured or unsecured loan via your mortgage broker.
Why is it critical to forward plan your cashflow?
Now the ATO can disclose a tax debt to credit reporting bureaus. This is not surprising when the ATO is owed close to $20b in overdue tax, approximately two thirds of which is owed by small businesses with an annual turnover under $2m.
The ATO’s credit reporting is initially only being applied to businesses with an ABN and tax debt of more than $10,000 that is at least 90 days overdue, but this may change in the future.
Defaults being recorded on a taxpayer’s credit file will have immediate and lasting consequences, as these are black marks lasting five years. Hence, early engagement with your Accountant and the ATO to manage unpaid tax is crucial.
You may be risking a bad credit report if you try to buy more time to trade out of your tax liabilities.
With the transparency and leverage on your credit rating, ATO debts can effectively complicate your ability to obtain finance. An ATO tax portal with no outstanding tax debts is also a condition to obtaining finance approval for most lenders.
ATO payment plan VS business loan
In most cases, your finance broker will be to suggest funding options for tax payments that may be better suited than a payment plan with the ATO.
These may include business loans over a longer loan term that will have a lesser impact on your monthly commitments than say a 12-month payment plan with the ATO. However, this may also be critical if you are considering applying for a home loan while you have a tax liability as your borrowing capacity will most likely be greater with a longer term business loan.
While the credit landscape is now becoming cautionary, the lending process doesn’t need to be daunting.
Getting the right advice early enough in the process means you will be in the best position to establish and maintain appropriate lending terms.
To understand your options better, we recommend speaking with your accountant or a mortgage broker. Click here if you’d like to arrange a no-obligation chat with a Consultant from the DPM Lending team.
Also read Debt Management – The Basics
Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.