Having a tax debt is a burden that can affect everything from your business through to your emotional state. But in some cases, you can get a release from your tax debts.

There are many reasons why you may accrue tax debt.

The most common is a miscalculation, either on your part or by the Australian Taxation Office (ATO). Simple oversights can lead to large sums of money going unaccounted for. And when the ATO decides that it’s time to collect, you then face an enormous challenge.

The emotional burden that living with tax debt can create is something that should never be underestimated.

Having a tax debt places an immediate strain on your finances. Furthermore, it means you have to interact constantly with the ATO, which creates even more stress.

However, there is some good news.

In certain circumstances, you may be able to get tax debt relief.

This article explains the conditions you must meet to get it and to which taxes it can apply.

Who Can Get Release from Tax Debts?

The ATO only offers specific relief services to the following:

  • Individuals
  • Trustees of the estate of a deceased person

Furthermore, you can only apply for tax debt relief if the debt is such a burden that it will have an extremely negative impact on your livelihood. This means the debt leaves you unable to provide for the essentials in life, such as housing, food, and education.

If the ATO believes you are capable of affording these essentials while repaying the debt, it’s unlikely they will grant relief.

Unfortunately, tax debt relief does not extend to companies, partnerships, or trusts. Any tax debts you accrue in one of these structures must be paid. However, the ATO does offer separate services for businesses that are experiencing financial difficulty. Furthermore, businesses have the option of taking out an unsecured business loan to help them to deal with their tax burdens.

Which Tax Debts Can Be Released?

While the ATO offers relief for a range of personal taxes, it does not offer relief for all of them. The following are the taxes that you cannot apply for relief from:

  • Excess Contribution Tax
  • Super Guarantee Charge
  • Division 293 Liabilities
  • Goods and Services Tax
  • Director Penalty Notices
  • PAYG Withholding

Thankfully, this leaves a large list of taxes that you can get relief from. The following are what you should focus on if you’re looking at releasing your tax debt:

  • Medicare Levies
  • PAYG Instalments
  • Income Tax
  • Mining Withholding Tax
  • Fringe Benefits Tax
  • Fringe Benefits Tax Instalments
  • Medicare Levy Surcharges
  • Managed Investment Trust Withholding Tax

You may also be able to claim relief from some of the fees and penalties associated with these types of tax debts.

How Can You Apply for Tax Debt Relief?

The application process is fairly simple.

The ATO provides an approved form that all applicants must use when applying for tax debt relief. This form outlines the conditions you must follow and collects the data the ATO needs to make their decision.

However, filling out the form is not a guarantee that you will receive tax debt relief.

The ATO takes several factors into account before making its decision. These include the following:

Your Financial Circumstances

As mentioned, tax debt relief is only available to those who face dire financial circumstances. 

The ATO will examine your ability to pay for life’s essentials while facing your current tax burden. If it finds that you can still afford to provide for yourself and your family while repaying the tax, it’s unlikely that you will receive relief.

This examination will look closely at your income and expenditure. In some cases, the ATO will make recommendations on how you can reduce your expenditure while offering an alternative payment plan.

Your Assets and Liabilities

The ATO will want to know what assets you’ve purchased and when you purchased them. Assets could include your home, vehicle, and household goods. However, it also includes investments, such as any additional properties you’ve bought.

In some cases, the ATO will consider assets, such as your home, as both reasonable and essential to your life. However, if you have investment properties that you could sell to clear your debt, the ATO may refuse to offer relief. 

Furthermore, if the ATO discovers that you’ve purchased assets while knowing you had a tax debt, it will consider these purchases as unreasonable. As such, it may reclaim those assets to repay your debt ahead of offering you tax debt relief.

Other Factors

Beyond these major factors, the ATO will also look into your personal financial history. They will want to see if you’ve complied with taxation issues in the past. Plus, they will make a judgement on whether your current circumstances, particularly related to your income, are likely to be temporary. If they are, the ATO may refuse your application for tax debt relief.

Other factors the ATO considers include how you spent your money when you weren’t considering your tax debts and if you have other debts that you need to repay.

What Should You Do Before You Apply?

Before applying for tax debt relief, you need to ensure that all of your documentation is in order. This means you must file any overdue tax documents with the ATO so that they have a record of your tax debt. 

You must also declare any unresolved disputes you have with the ATO. In most cases, these disputes must reach a resolution before you’re able to apply for tax debt relief.

Finally, you must ensure all contact data you provide is accurate and up-to-date. If the ATO can’t get in touch with you, they may refuse your application without your knowledge.

You Have Options

Having a personal tax debt can be a harrowing experience that can affect every aspect of your life.

However, with tax debt relief, you have an option that could relieve the burden and leave you free to continue your life. The information provided here should help you determine if you’re able to apply for it.

But what if you’re a business owner and your company is dealing with a tax issue?

Unfortunately, the ATO is not as lenient in these circumstances. 

However, you still have options thanks to Unsecured Finance Australia.

With our help, you can get an unsecured business loan that you can use to cover your tax debt while gaining more favourable terms.

The application process only takes a few minutes and you’ll receive approval within 24 hours if you qualify.

To find out more, check out our unsecured business loans today.