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Dealing with tax debt can be overwhelming, especially when your client receives notices from the Australian Taxation Office (ATO). Understanding these notices and taking proactive steps can help manage the relationship with the ATO and avoid the consequences of escalating debt collection. In this article, we will guide you through the different types of ATO notices and provide actionable advice to regain control of your client’s tax debt.
The Blue Notice
Your Call to Action
The blue notice is the first communication from the ATO, signalling the need for action. It is the first prompt to lodge a tax return and settle the debt. No matter the financial situation, it’s important not to ignore this notice. Take immediate action by lodging the return and reaching out to the ATO. If needed, explore options like setting up an ATO payment plan or seeking assistance from debt specialists.
The Orange Notice
Warning of Consequences
If your client fails to respond to the blue notice, the ATO will send an orange notice, outlining the potential repercussions of non-compliance. These consequences may include penalties for overdue years, default assessments, and even the issuance of a notice of non-compliance. Ignoring this notice can result in the disclosure of the debt to credit reporting bureaus, damaging the business’s credit score. Act promptly by lodging a return and following the advice provided in the blue notice.
The Red Notice:
Final Warning Before Legal Action
Consider the red notice as the final opportunity to avoid legal and debt recovery actions. This notice requests a justification for why your client should not face the penalties outlined in the orange notice. To protect your clients business, it is imperative to promptly lodge their return, pay the debt, and address any outstanding issues. Don’t delay any longer; take immediate action to avoid severe consequences.
ATO notices can seem daunting, but by taking control of the tax debt, you can navigate these challenges effectively. Remember, ignoring these notices can lead to escalating penalties (up to 75%), credit score damage, Garnishee Notice, Director Penalty Notice (DPN) and Statutory Demand and subsequent wining up application, and potential legal actions. Take proactive steps such as lodging a return, paying the debt, and maintaining open communication with the ATO. Seeking professional advice when needed and exploring available options like ATO payment plans or debt specialist assistance can significantly assist in managing a tax debt (Waterhouse Lawyers are experts at dealing with tax debt, contact them today to discuss how they may be able to assist you in regard to your tax debt). By addressing obligations promptly and proactively, your client can regain control, maintain a positive relationship with the ATO, and safeguard the business’s financial well-being. Don’t let ATO notices go unanswered; take action today and regain control of your client’s tax debt.
If you have a client facing financial difficulties and needs to turn things around, contact us today to set up a meeting. We’re experts in financial restructuring and in the other turnaround strategies needed to get a business back on track.