Payroll Tax Debt Finance

The two behave differently, and the difference changes what you should do first. Here is the honest comparison.

If you carry both, deal with them as two files. A single arrangement with the ATO does nothing about a state assessment, and a revenue office plan does not slow the general interest charge on an ATO balance.

Payroll tax debt rarely arrives as one clean number. It usually arrives as an assessment covering several years, because the liability existed before anyone noticed it. That is what makes it frightening to open.

1. 01Wages cross the threshold, often through growth, an acquisition or a contractor arrangement being reclassified.
2. 02Returns are not lodged, or are lodged on the wrong figures, because nobody at the business knew the liability had started.
3. 03A review or an audit picks it up, sometimes years later.
4. 04The revenue office issues assessments for the back years, with interest and penalty tax applied on top.
5. 05The current year keeps running while the back years sit unpaid, so the number is still moving.

The compounding is not as aggressive as the ATO general interest charge, but the penalty component can be large, and the back-year total is often the biggest single liability a mid-sized employer will ever face at once.

Recovery powers vary between jurisdictions, but the general shape is consistent. A revenue office does not have to go to court first to start collecting.

• Issue a garnishee to your bank, or to a customer who owes you money
• Register a charge over land in some jurisdictions
• Commence recovery proceedings in the relevant court
• Pursue directors or associated entities where the legislation allows it
• Withhold clearance certificates you need for a property sale or a business sale

WeL’nd is a finance and mortgage brokerage. We do not negotiate your assessment down and we are not a debt management firm. What we do is arrange the funds that let you pay the office, so the debt moves off a penalty footing and onto a lending structure with a term you can actually service.

1. 01

   Get the true number

   We need the assessment or the current statement of account, including interest and penalty tax, plus the current-year liability that is still accruing. A part-number leads to a part-solution and a second problem in four months.

2. 02

   Map every other obligation

   ATO balance, super, equipment finance, overdraft, cards, director loans. Payroll tax is almost never alone, and lenders assess the whole picture, not the piece you want to fix.

3. 03

   Find the security

   Equity in a home, an investment property, commercial premises or plant. Where there is genuine equity, this is usually the cheapest structure. Where there is not, we look at unsecured business lending or a shorter-term facility.

4. 04

   Match the lender to the file

   Some lenders will not touch a file with unpaid statutory debt. Others price it in, provided the debt is being cleared at settlement and the business is trading. Knowing which is which is most of the job.

5. 05

   Settle and pay the office

   Funds are usually directed to the revenue office at settlement rather than to you, which is both cleaner for the lender and faster for you. We coordinate payout figures so nothing is left dangling.

6. 06

   Set the business up so it does not recur

   The lodgement calendar, the current-year instalments and the cash set aside for them. A consolidation that fixes the past and ignores the present is only a delay.

Statutory debt makes a file harder, not impossible. What settles it is evidence: that the business trades, that the debt is finite, and that it will be gone at settlement.

If a document is unflattering, send it anyway. A lender who finds a problem in week three prices it as a surprise. A lender who is told in week one prices it as a fact.

Payroll tax has a grouping concept that catches people out. Related businesses can be grouped and assessed as one employer, so entities that each sat comfortably under the threshold are suddenly over it together. Common directors, common shareholders, shared employees and tracing rules can all pull a group together.

Contractors are the other frequent trigger. A person invoicing through a company is not automatically outside payroll tax. State contractor provisions look at the substance of the arrangement, and exemptions are narrower than most employers assume.

Grouping

Related businesses assessed as a single employer. Common directors, common shareholders, shared employees and tracing rules can all pull a group together.

Contractor provisions

State rules that treat payments to some contractors as wages. They look at the substance of the arrangement rather than the invoice.

Penalty tax

An amount added on top of the unpaid tax and interest, typically where returns were not lodged or were lodged on the wrong figures.

Annual reconciliation

The yearly return that squares what was paid across the year against what was actually owed. It is where an unnoticed liability most often surfaces.

Nexus

The rules deciding which state a wage belongs to when staff work across borders. It is how an employer acquires a second liability without opening a second office.

Clearance certificate

Confirmation from the revenue office that state tax obligations are met. Property and business sales can stall without one.

We say the true number early. Bad news travels better when it travels straight.

We work with a panel of more than forty lenders, from major banks through to non-bank and specialist funders, and we deal with the lender directly so you do not have to explain the situation five times. Where a bank is the right answer, we go to the bank. Where the timing or the credit history rules that out, we say so and look at the specialist end of the panel instead.

• One conversation to establish the real position, including anything you have not told your accountant yet
• A written view of the structures that are actually available to you, with the trade-offs stated
• Documents collected once and used across the panel rather than assembled again for each lender
• Payout figures coordinated so the revenue office is paid at settlement
• A follow-up after settlement, because a clean slate that fills again is not a result