Tax debt help for individuals in serious financial difficulty

We’re coming up to the end of year, which can be a difficult time for many people. If you’re struggling to meet your obligations and need some tax debt help, this post is designed to help you get started.

Here you will find the basic information and resources you need to get tax debt help that can relieve the burden and the stress if you’re in serious financial difficulty.

Who can receive tax debt help from the ATO?

The ATO has a debt release scheme where it will consider releasing part or the full amount of tax debt owed – in situations of serious hardship.

This tax debt help scheme is only available for individuals (or trustees of the estate of a deceased person) with financial difficulties or serious financial hardships.

Some examples of financial difficulties are:

The ATO would only consider such tax debt help for someone in ‘serious financial hardship’ and in specific circumstances.

A person is considered to be in ‘serious’ hardship when they are unable to provide the following for themselves, their family, or other dependents:

  • Food
  • Accommodation
  • Clothing
  • Medical treatment
  • Education
  • Other basic necessities
Do you qualify for tax debt relief?

To receive tax debt relief from the ATO you would need to meet the requirements described above for serious financial hardship.

Factors contributing to ‘serious hardship’ may include family tragedy, financial misfortune, serious illness, the impacts of a natural disaster, or other serious or difficult circumstances.

To prove that you are in serious financial hardship and to receive tax debt help, you would need to provide supporting evidence to the ATO, such as:

  • Official eviction notice
  • Pending disconnection of essential services, e.g. water, electricity, gas (does not include mobile phone or internet bills)
  • Notice of impending legal action
  • Letter from charitable organisation re-the loss of employment or inability to provide for basic necessities
  • Bank notice, e.g. overdraft call or mortgaged property repossession
  • Overdue medical bills
  • Letter from doctor verifying the inability to earn an income due to illness or caring for a sick family member
  • Final notice from school re-the payment of mandatory fees
  • Funeral expenses
  • Repossession notice of essential items, e.g. car, motorcycle

If the ATO is satisfied that you are experiencing several of the above issues, then you may be considered eligible to apply for the tax debt to be partially or fully released.

The types of tax debt help you can receive

Keep in mind that not all types of tax debt can be released through this scheme. It applies only to the following types of tax debts:

  • Income tax
  • Pay as you go (PAYG) income tax instalments
  • Fringe benefits tax
  • Fringe benefits tax instalments
  • Medicare levy
  • Medicare levy surcharge
  • Withholding tax
  • Mining withholding tax
  • Penalties and interest charges associated with these debts
What to do before applying for tax debt relief

Before you consider applying for the debt release with the ATO, you must:

  • Lodge all outstanding income tax returns and activity statements
  • Provide up-to-date contact information
  • Resolve all outstanding disputes with the ATO
  • Resolve any compensation, damages, or insurance claims

For those individuals with an outstanding tax debt with the ATO (where this is the only debt), it may be worthwhile assessing your personal financial situation to see if you are eligible for the ATO tax debt release, before entering into the process of formal bankruptcy.

For further assistance with understanding your options and to get tax debt help, please contact us on 1300 727 739 or email