As we are all aware, each financial year we are required to lodge a tax return. For self-employed & small business owners this can sometimes be complex & is always time consuming. Mistakes are sometimes made, or it doesn’t get completed on time which can result in a tax debt payable to the Australian Tax Office.
Most tax debts are prevented by business owners as they have set enough funds aside throughout the year to cover it, but for some people it is unexpectedly large & they find themselves having to enter a repayment plan with the ATO or look to borrow from a lender to cover the expense.
Now this is where it gets a little complicated, banks generally do not provide finance for the purpose of clearing tax debt. Reasons for this include:
- Banks are concerned that you won’t be able to repay your debt as this could mean that you are in an unstable financial position.
- Banks also think that if you fail to make payments on time or lodge timely tax returns with the ATO it is a sign of bad character & you may have no intention to repay debts in general.
We may be able to help you!
Some specialist lenders may allow you to borrow up to 85% of a property’s value (including any existing loans secured by the property) & the interest rates offered are likely to be lower than the ATO general interest charge rates.
To do this you will need to ensure the following applies:
- You must own property that can be used as security for the loan.
- You must be able to supply proof that you can afford this new loan. Proof needs to be in the form of, but not limited to; bank statements, pay slips & previous tax returns.
- The tax debt combined with your current mortgage must be LESS than 85% of the current value of your property.
- And in most cases, the tax debt needs to be cleared in full as part of the refinance.
The ATO announced last year that it would start recording tax debt defaults on credit files of Australian business owners. This would affect your chance of getting approved for a home loan in the future & reduce your borrowing power.
After talking to your accountant, if refinancing your tax debt is an option for you, please call us today. We’d love to take the worry off your shoulders & find the right solution for you. Don’t live with unnecessary stress. Get in contact with our friendly team, grab a coffee & chat.
The above information is general in nature. It has been prepared without taking into account your objectives, financial situation or needs.