Tax Debts

If you are having trouble paying your tax debt due to financial difficulty, you should contact the Tax Office immediately on 13 11 42. They will discuss the options available to help you meet your obligations. These options may include an arrangement to pay by instalments or remission of general interest charges.

When you call the Tax Office you will speak with trained staff who will assist you to deal with the tax debt and move on. To help them identify the most suitable option, you should explain your situation and individual circumstances, including why you are having trouble paying and your current income, expenditure, asset and liability position.

Serious financial hardship

If payment of your tax debt will cause you serious hardship, you should phone the Tax Office immediately on 13 11 42 to discuss your situation. The Tax Office has an area dedicated to assisting people who face serious hardship and they look at the particular circumstances of each case. They have a range of options available, depending on your situation, including longer-term payment arrangements, general interest charge remission and, in some circumstances, release from some or all of your debt.

The Tax Office considers you to be in “serious hardship” when payment of the debt would leave you unable to provide food, accommodation, clothing, medical treatment, education or other necessities for yourself or your family, or other people for whom you are responsible.

Here is some more information on what to do if you cannot pay your tax debt on time.

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Taxation liabilities from which you can apply to be released

Under tax law, you can apply for release from certain taxation debts, including income tax, withholding tax, and Medicare levies and surcharges. Release from penalties and charges associated with the outstanding debts may also be granted. Only an individual or the trustee of a deceased person’s estate can apply for release.

If the Tax office refuses your application for release, you may apply to have the decision reviewed through the Administrative Appeals Tribunal. You should seek legal advice if you wish to pursue the matter in this way.

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Higher Education Loan Program (HELP) and Financial Supplement debt

If you have an accumulated HELP debt (known as HECS debt until 2006) or Financial Supplement debt, you will be required to repay this debt through the tax system when your income is above the minimum repayment threshold for compulsory repayment. If your circumstances change and your income falls below the threshold, you may be entitled to a refund of any additional amounts withheld for HELP or Financial Supplement debts throughout the financial year. This is determined once you lodge your income tax return for that relevant year.

You may apply to defer your compulsory repayment if either:

  • making your compulsory repayment would cause you serious hardship
  • there are other special reasons why you should not make a compulsory repayment.

Deferring your compulsory HELP or Financial Supplement repayment

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Case study 1

Gina is a 36-year-old sewing machinist who has a tax debt of $3,500 including $600 general interest charges (GIC). Gina’s husband has been made redundant and is experiencing difficulty in gaining employment. The couple have three children aged between five and 12. While the family are doing it tough they have recently gained access to funds through the equity in their house. When Gina explained her circumstances to the Tax Office they remitted the GIC on her account and agreed to an arrangement for her to pay the remaining debt in manageable instalments over a 12-month period.

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Case study 2

Alex is 61 years old and works as a store assistant on a casual basis. He has accumulated a tax debt of $28,000 over a number of years, which includes $16,000 of GIC. His employer is withholding tax from his fortnightly earnings but, as he is a casual worker, Alex is on a low income and is struggling to afford even the basics for his family. Alex has recently had a triple bypass and has ongoing health concerns. He and his wife are legal guardians of grandchildren aged eight and 11. The house they live in is owned by his sister-in-law and only upkeep and utility payments are required. After getting in contact with the Tax Office to discuss his debt, Alex was referred to the Hardship team. On their advice, he applied for, and was granted, release from his tax debt.

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