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When it comes to taxes, failing to meet your obligations can lead to a host of financial and legal consequences. In Australia, the Australian Taxation Office (ATO) takes tax compliance seriously, and non-payment of taxes can result in a series of penalties, interest charges, and even legal action. It’s essential to understand the potential ramifications and seek guidance from experienced tax consultants in Melbourne to navigate the complexities of the Australian tax system.

However, you aren’t going straight to jail for tax fraud immediately if you miss the deadline. Generally, if you are co-operative with the ATO they are willing to help you out in many circumstances, and there are many warnings that occur before the most severe penalties apply.

When is your income tax statement due:

For individuals, the due date for paying your income tax is usually on, or before October 31st after the end of the financial year (July 1 to June 30).  For example, your taxes for the 2022-23 financial year have a due date of October 31st, 2023. However, if you are using a registered tax agent or an extension is granted, the due date can be extended to a later date. For businesses, the due date for paying income tax varies based on the business structure and the financial year. A Melbourne tax consultant can help determine when the due date is for your business if you are uncertain.

ATO Support

If you have circumstances that require you to delay your tax payment, the ATO advises to get in contact with them before the deadline to work out the best ways they can provide support and avoid them following up more aggressively after the deadline has passed. They have a variety of support solutions available, from payment plans and management, to tax debt compromises and deferred payments.

What happens if you don’t pay your tax on time

The ATO has a few options if you don’t pay your tax on-time. These include charging interest on your unpaid tax amounts, and using any future refunds or credits to repay the amount you owe. The interest is in the form of a ‘general interest charge.’ They will follow up with you promptly via a variety of methods including SMS, mail, phone and more to notify you of the overdue payment, to attempt payment as quickly as possible. If you are struggling with taxes and paying your tax on time, it is recommended to get in touch with an accounting expert such as a tax consultant in Melbourne, and they can help ease the burden.

General Interest Charges (GIC)

General Interest Charges (GIC) in Australia are imposed by the Australian Taxation Office (ATO) on unpaid tax debts to incentivise timely payments and compensate for delayed funds. The rate of GIC fluctuates, changing quarterly. As of November 2023, the rate is 11.15% per annum. GIC is applied to various unpaid taxes, such as income tax, Goods and Services Tax (GST), and more. Interest accrues from the due date, with the rate determined by the ATO and compounded daily.

Taxpayers can enter payment arrangements with the ATO if they can’t pay in full, though GIC continues to accrue. Disputes can be raised if there are issues with the tax debt or GIC application, and the are options to receive a remission on some or all of the interest paid if you have appropriate circumstances.

Harsher Penalties – Garnishee Notice:

The Australian Taxation Office (ATO) has a range of stronger actions it can take when taxpayers fail to meet their tax obligations. One of these stronger measures is a Garnishee Notice.

A garnishee notice, or garnishment order, is a legal directive issued by the ATO, instructing a third party, often an employer or a financial institution, to withhold a specified portion of an individual’s income or bank funds to settle a debt or obligation.

Issuance: When an individual or a business fails to pay their taxes, the ATO or another relevant authority may issue a garnishee notice to collect the owed tax debt. The notice specifies the amount to be withheld and the third party that must comply with the order.

Third-Party Involvement: The garnishee notice is served on the third party, which can be the taxpayer’s employer or their bank, directing them to withhold the specified amount from the taxpayer’s wages or bank account.

Withholding: The third party is legally required to comply with the garnishee notice and withhold the specified funds. These funds are then remitted to the authority that issued the notice (e.g., the ATO).

Notification: The taxpayer is typically notified by the third party or the issuing authority that the garnishee notice has been executed, and a portion of their income or bank funds has been withheld to settle the debt.

Legal Action

In some scenarios, the ATO can take even further action, including legal action. This will be discussed in part 2 of this blog.

Do you need a tax consultant in Melbourne?

Centre Of Wealth’s tax consultants in Melbourne are your financial partners for everything tax related. From SMSF management to making sure your taxes are done correctly and on time, Centre OF Wealth is a name you can trust.

Speak to a tax consultant in Melbourne today:

Get in contact with a member of our accounting consultant team today via the contact page on our website! Or call either of our Melbourne branches:

Upper Ferntree Gully: 03 9758 1202

Bentleigh East: 03 9570 4565