Tax debt lawyers

A tax debt lawyer helps when you owe the ATO money and can't simply pay it. We check whether the debt is right, deal with the ATO about how and when it is paid, and respond to collection action such as director penalty notices, garnishee notices and bankruptcy. The earlier you get advice, the more options you usually have.

We act for businesses, directors and individuals with ATO and Revenue NSW debts across Australia. Our team includes lawyers and a Chartered Accountant, so we can test whether the debt is right before we negotiate how it's paid. If your accountant is already involved, we work alongside them. If you're not sure what an ATO notice means or how long you have, start with our guide to ATO letters and what to do about them.

What happens if you don't pay a tax debt?

Once a tax debt is due and payable, it is a debt due to the Commonwealth, and the ATO can sue to recover it (Taxation Administration Act 1953 (TAA), Sch 1 s 255-5).

General interest charge (GIC) accrues daily while the debt is unpaid, and unpaid interest itself attracts interest (TAA s 8AAC). The rate is the base interest rate (the monthly average yield of 90-day Bank Accepted Bills, published by the Reserve Bank) plus 7 percentage points, set each quarter (TAA s 8AAD). For income years starting on or after 1 July 2025, GIC and shortfall interest charge can't be deducted (Income Tax Assessment Act 1997, s 26-5(1A)).

For due dates and what happens if you miss them, see how long you have to pay an ATO debt.

What can the ATO do to collect a tax debt?

Director penalty notices

Directors can be personally liable for a company's unpaid PAYG withholding, GST and super guarantee charge. The ATO can't start court proceedings to recover the penalty until 21 days after it gives the notice, and the notice is treated as given when it is posted to, or left at, your address on ASIC's records, not when you read it (TAA Sch 1 ss 269-25 and 269-50).

If the company pays the debt in full within those 21 days, the penalty is remitted. For PAYG withholding and GST the company reported within 3 months after the due date, and super guarantee charge it reported by the due date, appointing an administrator or small business restructuring practitioner, or starting a winding up, within the 21 days generally remits it too. That doesn't work for amounts reported later, which is what people mean by a lockdown DPN (s 269-30). See director penalty notice lawyers.

Garnishee notices

The ATO can require anyone who owes or may later owe you money, such as your bank or a customer, to pay the ATO instead (TAA Sch 1 s 260-5). A notice can take a lump sum, or a set amount or percentage of each future payment until the debt is cleared, and the ATO must send you a copy. See ATO garnishee notices.

Departure prohibition orders

The ATO can stop a person with a tax liability leaving Australia if it believes on reasonable grounds that this is desirable to make sure they don't leave without paying or making satisfactory arrangements to pay (TAA s 14S). An order can be revoked, a departure authorisation certificate may allow travel, and the order can be appealed to the Federal Court or a state or territory Supreme Court (TAA ss 14T, 14U and 14V). A refusal to revoke an order or to issue a certificate can be reviewed by the Administrative Review Tribunal (s 14Y). See departure prohibition orders.

Statutory demands, winding up and bankruptcy

For a company, the ATO can serve a creditor's statutory demand (Corporations Act 2001, s 459E). The company generally has 21 days after the demand is served to pay. It can apply to court to set the demand aside, but the application and a supporting affidavit must be filed and served on the ATO within the same 21 days, and that limit is strict (s 459G). If the company doesn't comply with the demand, the court must presume it is insolvent on a winding-up application made within the following 3 months, unless the contrary is proved (s 459C).

For an individual, the ATO usually obtains a court judgment first, then serves a bankruptcy notice and, if that isn't complied with, petitions for bankruptcy (Bankruptcy Act 1966, ss 40(1)(g) and 44). A bankruptcy notice generally must be complied with within 21 days after it is served (s 41(2A)). See ATO statutory demands, winding up and bankruptcy.

Credit reporting of business tax debts

The ATO can report certain overdue business tax debts to credit reporting bureaus (TAA Sch 1 s 355-72). Before it first does so, it must write to the business explaining why it qualifies and any steps it can take to avoid the disclosure, then wait 28 days. See small business tax debt and ATO credit reporting.

What are your options for dealing with a tax debt?

The right option depends on whether the debt is correct, what you can afford and what the ATO has already started. Often it is a combination.

A payment plan

The ATO can let you pay a tax debt by instalments under a payment arrangement (TAA Sch 1 s 255-15). An arrangement doesn't change the due date, so GIC keeps accruing on the unpaid balance. A plan you can't keep up can leave you worse off, so it should be built on real cash-flow figures. See ATO payment plans and payment arrangements.

Release from a tax debt

An individual can apply to be released from some tax debts if paying them would cause serious hardship (TAA Sch 1 s 340-5). The trustee of a deceased estate can also apply where the deceased's dependants would suffer serious hardship. Release covers listed liabilities, including income tax, fringe benefits tax, Medicare levy, PAYG instalments and certain related interest and penalties (s 340-10). It isn't available to companies or other entities, or for GST or PAYG withholding. You can object to a refusal (s 340-5(7)). See release from tax debt and ATO hardship.

Using super to pay a tax debt

Generally, you can't take money out of super early just to pay the ATO. The compassionate grounds for early release don't include tax debts, and the severe financial hardship ground is limited to people who have been receiving Commonwealth income support (Superannuation Industry (Supervision) Regulations 1994, regs 6.01(5) and 6.19A). The main exception is a super-related tax, such as Division 293 tax or tax on excess contributions, which can be paid from super under an ATO release authority (TAA Sch 1 s 131-5). See using super to pay a tax debt.

Interest and penalty remission

The ATO can remit all or part of GIC (TAA s 8AAG) and of administrative penalties (TAA Sch 1 s 298-20). For GIC on a late payment, one of three statutory grounds must apply. See GIC remission.

Challenging the debt

If the debt comes from an assessment or decision you think is wrong, the answer may be an objection. An objection to an income tax assessment generally must be lodged within 2 years after the notice of assessment is given for most individuals and small and medium businesses, or 4 years for others. Many other decisions have a 60-day limit (TAA s 14ZW). If the time has passed, you can still lodge the objection with a request that the ATO deal with it out of time, but that isn't automatic (s 14ZW(2)). See ATO objections.

An ATO estimate of unpaid PAYG withholding, a GST net amount or super guarantee charge can be reduced or revoked by giving the ATO a statutory declaration within 7 days after it gives notice of the estimate, or a longer period it allows (TAA Sch 1 ss 268-10 and 268-40). The 7 days run from when the ATO posts or leaves the notice, not when you receive it (s 268-15(4)).

Objecting doesn't change the due date, and the ATO can generally still recover a disputed debt, including while a Tribunal review or court appeal is pending (TAA ss 14ZZM and 14ZZR). In practice statement PS LA 2011/4, though, the ATO says it won't take recovery action while an objection, review or appeal is on foot where the taxpayer's affairs are straightforward and the risk to the revenue is low. It reassesses that risk as the dispute goes on, and GIC keeps accruing on the unpaid amount (PS LA 2011/4, paras 10, 20 and 23).

The ATO expects large businesses and wealthy groups to pay in full or enter a 50:50 arrangement: paying all undisputed debts and at least half the disputed primary tax, in return for deferred recovery of the rest and remission of part of the GIC. Other taxpayers can also ask for a 50:50 arrangement to limit their GIC (PS LA 2011/4, paras 6, 11 and 25–28). If a small business asks the Tribunal to review an objection decision on an assessment relating to its business, it can also ask the Tribunal to order a pause on recovery while the review runs (TAA ss 14ZZM and 14ZZH).

When do you need a tax debt lawyer?

Your accountant may be able to deal with a straightforward payment plan. A lawyer adds value when:

• the ATO has started enforcement, such as a garnishee notice, statutory demand or bankruptcy notice
• directors are personally exposed to director penalties
• the debt itself is disputed
• communications may need the protection of legal professional privilege
• you need someone to act for you in court, for example to set aside a statutory demand or appeal against a departure prohibition order.

How we help with a tax debt

1. Check the debt. If an assessment, estimate or penalty is wrong, the answer may be to challenge it, not to agree a payment plan.
2. Engage early. We contact the ATO, explain what is happening and ask for time while we work out a solution.
3. Negotiate a realistic plan. We prepare and negotiate payment proposals backed by cash-flow evidence, so the ATO can see how the debt will be paid.
4. Seek to reduce the interest. We pursue remission of GIC and penalties where the grounds exist.
5. Watch directors' exposure. We check personal liability under the director penalty rules at every step.

Next step

Send us your latest ATO statement of account, copies of any notices you've received (a director penalty notice, garnishee notice, statutory demand or bankruptcy notice in particular, with the date on each) and a short note of what you can realistically pay each month. In a first call we'll tell you what the ATO can do next, how much time you have and which options are worth pursuing.