The ATO and Financial Hardship

ATO Financial Hardship Application

Often when individuals are in a time of financial crisis, tax obligations become hard to manage and this debt can get out of control. Working with the ATO seem like a David and Goliath struggle, but there are options when managing personal and business tax debt.

It’s not uncommon for people who are experiencing financial hardship to have debts with the Australian Tax Office (ATO). Just Budget deals with many different credit providers, including the ATO. We help people to set up and manage payment plans as well as discuss and negotiate debt obligations with creditors. Our experience in this area could make all the difference in your application for hardship.

The majority of creditors to be fair and responsible when dealing with matters of financial hardship, and the ATO is no exception, with provisions for people in legitimate financial hardship. If your claim for hardship is strong there are ways to a. reduce the debt you owe, b. negotiate terms that are manageable under your current circumstances.

ATO Financial Hardship Application

In one recent example Just Budget presented a financial hardship submission to the ATO.  This submission was quite detailed and included an explanation of why our client was struggling financially, a comprehensive budget and a proposed payment plan to retire the debt over time.  In short our client acknowledged the debt and wanted to pay it back in accordance to her financial capacity. This client had suffered from serious health issues which had impaired her ability to continue operating her small business.

Just Budget put together a proposal to reduce the debt, and payment terms that the client could maintain realistically, including official reports from her numerous medical professionals, from her GP and specialists, as well as her financial statements and summary of her situation.

This submission clearly detailed our client’s personal, medical, emotional and financial position and the repayment offer represented the most our client was able to pay. The client legitimately wanted to pay her debt, but her situation made this next to impossible.

It was also pointed out to the ATO that this client had little in the way of savings or assets and this was a genuine attempt to retire the debt in full.

The ATO Response to Proposal In This Case

The response we received was quite surprising. Due to the complex set of circumstances the ATO released the client from all of her debt. Our proposal meant that they were able to see that her hardship was so serious hardship and meant that payment of the debt would leave her unable to provide food, accommodation, clothing, medical treatment, education or other necessities for her family as she was the sole breadwinner.

It isn’t common for the ATO to do this, but if you have a legitimate claim our goal is to ensure that this claim is presented in such a way that there is no doubt as to the legitimacy of the proposal.

How To Achieve Positive Outcomes With ATO and Financial Hardship

Factors contributing to serious hardship generally include family tragedy, financial misfortune, serious illness, impacts of natural disaster and other serious or difficult circumstances.

Australian Tax Office

For example, if you have a medical or mental health issue, for which you are being treated, and this has genuinely, directly impacted your ability to work or run your business, and meet your tax obligations, we have seen instances when the Australian Tax Office has been compassionate and in fact wiped the slate clean. This is not common, but if approached in a calm and moderate way, the ATO does have some discretion.

A legitimate claim, that is documented and applied for in the right way, can lead the way to the ATO reducing the debt, or in some cases, releasing the applicant of the debt:

Examples of ATO Severe Financial Hardship Documentation:

  • Eviction Notice
  • Letter from charitable organisation regarding loss of employment or inability to provide for basic necessities
  • Bank notice for example, overdraft call or mortgaged property repossession
  • Letter from doctor verifying the inability to earn an income due to illness or caring for a sick family member
  • Repossession notice of essential items, like a car or motorcycle
  • Pending disconnection of essential services, like water, electricity, gas (does not include mobile phone or internet bills)
  • Reports from medical professionals regarding the physical and mental health of the applicant.

There is the option for the ATO to release a person from some, or all, tax debt or process a Tax Return quickly.

Because the Australian Tax Office are vigilant when enforcing payment of obligations, many people are scared to face the issue and ask for help, especially when they are in a crisis and under extreme stress. Your debts to the ATO may seem overwhelming but burying your head in the sand is not the solution. Before the situation declines, speak to a professional, about how you can approach the issue. There are options and there is a way to get your head above water.


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