As of 1st April 2020, company directors may now be held liable for their company’s outstanding GST (and other statutory) payments in an Australian Tax Office (ATO) crackdown.
What this means is that the ATO can potentially recover outstanding payments from the director personally. It is a complex area that you should be well informed about, so it would be wise to discuss this in detail with your accountant before the changes come into effect.
So, what can you do to manage your GST and other statutory/tax payments from a cash flow perspective? Here are some tips that may assist you:
- Speak to your tax adviser – it is important to get the right advice from a competent accountant/tax adviser. They should be able to help you put in place the correct structures and tax strategy to ensure that surprises are minimised;
- Allocate funds in a separate account – it may also be a good idea to open a separate account to your main trading account. By crediting this account with a specific proportion of all sales revenues e.g. 25% or 30% (as suggested by your accountant), you may be able to ensure that you always have money aside for those statutory payments. Having the funds in a separate account may also reduce the temptation to dip into it;
- Consider your finance options – there are lenders that don’t mind financing an ATO debt (depending on the severity). Financing ATO debt may minimise the cash flow burden of clearing the debt from cash reserves. The added benefit is that a loan may be perceived by prospective lenders more favourably than an ATO debt (even one on a formal payment plan), as lenders typically don’t like outstanding statutory payments, and the same may prejudice loan applications you may be planning;
- Seek help early – if you feel you may have problems paying your GST and/or other statutory/tax payments, approaching the ATO early may assist you in avoiding and/or reducing potential penalties for overdue payments. At times, it may be necessary and helpful to arrange a formal payment arrangement with the ATO to alleviate the pressure and consequences of overdue statutory payments. Although, it should be noted that these payment arrangements are not always looked upon favourably by lenders.
If you have any cash flow concerns or need financial assistance to pay your GST, PAYG Withholding, Superannuation Guarantee or any other statutory payments, contact us now to discuss your options before your concerns become actual problems.
Disclaimer: The information provided herein is for general information purposes only and does not constitute specific advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific advice should be obtained from a suitably qualified professional before adopting any investment/financial strategy.