How construction businesses can negotiate payment arrangements with the ATO
Start with the account you need to resolve
A construction business can have money tied up in disputed invoices while its tax account falls overdue. If you cannot pay an amount when it is due, contact the ATO or your registered tax or BAS agent promptly to discuss the position.
A payment arrangement may be available, but approval and terms depend on the circumstances. Do not base the business's cash forecast on an arrangement that has only been proposed. Record what the ATO actually agrees and any conditions attached.
Before the discussion, identify the relevant account, outstanding statements and current balance. Keep payment records and recent correspondence together so you can explain any discrepancy instead of estimating the debt from memory.
Separate the old debt from new obligations
A payment plan addresses the debt covered by the arrangement. You still need to consider the business's continuing lodgement and payment obligations. Ask your agent to identify what remains outstanding and what will fall due while the plan is running.
Put those upcoming commitments into the cash forecast alongside the proposed instalments. A proposal that uses every available dollar to repay old debt may leave the business unable to meet the next wages, supplier payment or tax obligation.
Keep lodgement and payment as separate checks. If money is short, ask what must still be lodged and what payment options can be discussed. Do not wait for every bookkeeping question to be resolved before raising an approaching payment difficulty.
Source: ATO payment plan conditions and continuing obligations
Build the proposal from realistic receipts
List available bank funds and the receipts expected during the proposed repayment period. Distinguish money already received, confirmed upcoming receipts and invoices whose timing or amount is uncertain. Explain significant assumptions rather than treating all outstanding invoices as cash.
Then list the commitments the business needs to meet over the same period. Include the proposed instalments and continuing tax obligations as well as operating costs. Check the timing: an expected receipt next month does not fund a payment due this week.
Use that information to discuss an affordable proposal. If a delayed customer payment would make the proposal fail, identify the issue before agreeing to it and ask your adviser what alternatives should be considered.
Check interest and the agreed conditions
General interest charge can continue to accrue on overdue tax while a payment plan is in place. Do not assume that an instalment arrangement freezes the balance or waives interest. Check the current account and the terms of the arrangement.
If you want the ATO to consider interest remission, ask about the process and the evidence relevant to your circumstances. A request is not an approval, so keep any proposed reduction separate from the amount currently recorded as owing.
Confirm instalment amounts, due dates and payment references. Keep the agreed terms where the person making payments can find them. Check how you will monitor successful payments and respond if an instalment cannot be made.
Keep formal notices separate from the negotiation
If a formal notice has arrived, send the complete document to an appropriately qualified adviser promptly. Ask them to check the response required and the applicable deadline. Do not assume that a payment discussion changes the notice or pauses its requirements.
A company payment arrangement and a director's potential personal exposure are different issues. This article does not determine whether a director penalty applies, whether a defence is available or whether a proposed action affects that liability.
Bring any personal notice, company correspondence and relevant payment history to the adviser. Clear records allow those questions to be assessed on the actual facts rather than on assumptions about what a payment plan protects.
Follow up what was agreed
After the discussion, record the agreed next steps, who is responsible and when each action is due. Reconcile payments against the account and keep confirmation of any change to the arrangement.
If circumstances change, contact the ATO or your agent promptly. Explain the change and ask what can be done; do not silently replace an agreed instalment with a different amount or date.
The practical aim is a proposal the business understands and can monitor. If the wider business cannot meet its debts, seek advice about that position as well as the individual tax account. A payment plan alone is not an assessment of business viability.