What happens if, instead of getting a juicy refund, you get a tax bill?

If your business has weathered a financial downturn you could easily find yourself coming up short come tax time. And if you’re on social welfare it’s quite common to be accidentally overpaid.

Of course the easiest way to manage your tax is to pay in full and on time. But our tax system is notoriously tricky, so it’s easy to find yourself in trouble.

And sooner or later, Mr Tax Man will present you with a mighty bill.

So what do you do if you get a tax debt?

The first thing is do is contact the Australian Tax Office – pronto. The longer you leave it, the bigger the problem will get – literally. Because you have to pay interest on your debt, it makes sense to pay it back as quickly as you can.

Often the best solution is a payment plan. You can find out how to set one up here.

If you’re a business owner, it’s a good idea to keep up to date and lodge your activity statements and tax returns on time, even if you can’t afford to pay the tax. That way you’ll avoid a fine, and at the same time show the ATO that you’re trying to do the right thing. It’ll help make negotiations about paying back your debt go smoothly.

You’ll be surprised just how supportive the ATO can be if you’re going through a hard patch – they’ll help you set up a manageable payment plan that won’t cripple you financially.

But if you try to dodge your responsibilities you can expect them to play hard ball. So, to keep on their nice side, don’t default on your agreed repayments and don’t be difficult.

You can get more information about managing your tax debt here. Or, if you need a bit of a helping hand, find a friendly accountant or tax agent here.

Good luck.