Tax debt implications for business owners
GST payment time can be stressful for many small business owners. Owing money to the ATO can make it challenging to access business or personal finance.
First, traditional lenders have a negative view of tax debt. In most cases, they won’t lend to business owners who have outstanding tax debt, even if they have arranged a payment plan with the ATO. For this reason, businesses with tax debt have limited options when seeking finance. For example, a business owner seeking a business loan or wanting to refinance a home mortgage will find it difficult to obtain bank finance.
Second, legislation passed in 2018 empowered the ATO to begin reporting business tax debts to credit reporting agencies, making it possible to include tax debt in business credit reports. As a result, the ATO can report Australian businesses to credit agencies that owe more than $100,000 that is more than 90 days overdue.
Options for GST payment
There are several options for GST payment. Businesses with under $20 million in annual turnover will usually report and pay quarterly unless otherwise specified by the ATO. Businesses that have over $20 million in annual turnover are required to report and pay monthly. Organisations that have voluntarily registered for the goods and services tax (with less than $75,000 in annual turnover) can report and pay annually.
Most businesses report and pay their GST quarterly. During the financial year, the due dates are:
Quarter 1 – July, August and September – 28 October
Quarter 2 – October, November and December – 28 February
Quarter 3 – January, February and March – 28 April
Quarter 4 – April, May and June – 28 July
Once a business has completed a hard copy or online version of the BAS, the amount due need to be paid to the ATO. GST payment can be made by BPAY online or by credit card over the phone.
What happens when a business cannot make its GST payment?
If a business can’t pay on time, it will still need to lodge a BAS by the due date. Otherwise, the business owner could be subject to a fine. One option is for the business to set up a payment plan with the ATO. If the GST debt is less than $100,000, this can be done over the phone using an automated system. It can also be arranged online with a MyGov account linked to the ATO.
However, as noted earlier, having a payment plan with the ATO isn’t always the right option because it can hinder a business owner’s ability to get finance.
How can finance brokers help small business GST payment challenges?
When a business is not able to pay its GST obligation, it’s a sign of cash flow challenges. Reasons for this can include having a major project in progress, waiting for a large invoice to paid or being in a slow period for a seasonal business. Whatever the reason, unsecured business finance could be an option to help the business meet its GST payment obligations.
Moula makes it easy to help your clients get access to finance and cover cash flow shortfalls. By removing the stacks of paperwork and long wait times, we have streamlined the loan application process. Moula’s lending decisions are based on a company’s bank and accounting data, so we can provide an answer within 24 hours. If approved, the funds will be deposited in your client’s bank account by the next business day.
Learn more about small business loans from Moula.