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The profitable way to manage your clients’ ATO debts

ChangeGPS // Tax Planning, Debt Repayment

As COVID subsides, the ATO is returning to the strong engagement tactics we saw before the pandemic. At the same time, your clients could be struggling to get their businesses back on an even keel following the impacts of lockdown, border closures and problems with supply chains. They may well owe money to the ATO. In this case, you can help them manage their tax debts and build your business in the process. These tips show you how take a proactive approach.


Make sure your clients lodge their activity statements

It’s absolutely vital that your clients submit their activity statements on time even if they can’t pay the debt in full. The ATO is far more likely to consider alternative payment arrangements if their paperwork is up to date.

Develop a plan

The ATO client account running balance report is very useful as it can flag potential problems. From there, you need to build up a comprehensive picture of a struggling client’s financial position. You can then help them to develop a plan that will get them back on track. The ATO responds best to early intervention. The sooner the plan is in place, the better it will be for your client’s peace of mind, their business and your own reputation.

Negotiate an arrangement with the ATO

The ATO acknowledges that some clients may not pay their tax debt in full and they’re prepared to consider reasonable proposals for a payment arrangement. As before COVID, they may want to satisfy themselves that your client will be able to follow through on any agreement. Along with when, how much and how often your client intends to pay, they may ask for financial details such as profit and loss statements, balance sheets, debtor and creditor information and cashflow forecasts. There will also be questions about how your client was affected by COVID and where they are in terms of recovery.

This will all be taken into consideration with information already in the ATO’s system, such as whether your client’s lodgements are up to date, whether they had previous arrangements and, if so, whether there were any defaults. Once the arrangement has been agreed, you and your clients will be able to manage the payment plan online by viewing upcoming instalments and making any necessary adjustments.


Be realistic

In some circumstances, the ATO will accept a voluntary offer of a second mortgage over a property as security. However, you should think very carefully before encouraging your client to take this path. Even before COVID, some poorly-run small businesses were unlikely to make a profit or catch up with their tax and super obligations. Others have found themselves unable to recover from the impact of the pandemic. Either way, if your client is in this serious a position, talking to an insolvency professional could be a more realistic and helpful long-term approach. Once your client is either in voluntary administration or liquidation, the ATO will communicate with the administrator or the liquidator rather than you or your client.

Charge for your services

It can easily take three or four hours to collect the financial information requested for an ATO payment plan. There’s little difference from helping a client to apply for a bank loan, so you need to charge an appropriate fee. It’s also important for your clients to understand the value of the service you’re providing, so set out clearly and in advance what it involves.

Tools to streamline the process

ChangeGPS TaxPlan provides tools to make the process of managing tax debt faster and more profitable.

The Payment Plan email is a proactive way to engage with clients who owe a significant amount of tax. Ready to send, it puts you on the front foot by spelling out the reasons why they need to take prompt action. The Value Email details the value of your service. This includes your charge for negotiating a repayment plan with the ATO and then providing a tax flow report. The Tax Flow Report calculates your clients’ company tax and quarterly PAYG then alerts your clients to when these, along with any repayment plans, need to be paid. As tax is the biggest cash outflow for most businesses, this can also open the door to a cashflow advisory conversation and how the Change GPS 12-month cashflow forecast can help.

No matter what size your practice, today's innovative technologies let you expand your business – and help you work smarter, not harder. One way to expand your services is by offering clients estate planning strategies. ChangeGPS provides standardised tools, templates, and workpapers to streamline and simplify the estate planning process, boosting efficiencies while lowering costs. Once set up, you’ll be well-positioned to take advantage of opportunities as they arise.

Find out more by contacting us now to book a no-obligation free consultation. We’ll be happy to show just how easily you can grow.


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