Can GST or BAS debt be released for hardship?
Short answer
No. GST cannot be released for serious hardship, and neither can PAYG withholding or the super guarantee charge, which make up the rest of a typical BAS debt. Hardship release only covers income tax, PAYG instalments, FBT and the Medicare levy, and only for individuals. A BAS debt has to be handled another way. The options are set out at ATO debt forgiveness.
Why GST and PAYG withholding are excluded
The law that lets the ATO release a debt for serious hardship lists the taxes it applies to, and GST is not on the list. The reasoning is that GST and PAYG withholding are amounts you collected from customers or withheld from employees' wages on the government's behalf. The ATO treats them as money that was never yours, which is also why they attract director penalties and why a DPN can include GST.
The same applies to the super guarantee charge and to director penalty notice amounts. If your BAS debt is all GST and PAYG withholding, a hardship application will be refused no matter how difficult your circumstances are.
The interest and penalties attached to a GST debt are a different story. They are not released under hardship rules either, but they can be remitted, and that is where most of the relief on a BAS debt comes from.
What you can do with a BAS debt instead
| Option | Who | What it does |
|---|---|---|
| Payment plan | Anyone | Spreads the debt, stops firmer action, keeps a business trading. Online up to $200,000. |
| GIC and penalty remission | Anyone | Removes some or all of the interest and penalties. Often the largest saving on an older BAS debt. |
| Hardship release | Individuals and sole traders | Only for the income tax and PAYG instalment part of a mixed debt. GST stays. |
| Small business restructuring | Companies under $1 million in liabilities | A plan paying creditors a portion; the unpaid GST balance is legally extinguished if the plan is approved. |
| Bankruptcy | Sole traders and individuals | GST and PAYG debts personal to a sole trader are provable and generally released on discharge. |
For most sole traders the realistic combination is a payment plan on the GST plus remission of the interest, with a hardship application only for any income tax component.
Stuck with a BAS debt you cannot clear?
A specialist can work out the plan and remission combination that fits. Free, no obligation.
If your debt is a mix of income tax and BAS
The ATO assesses release by debt type, not by total. A sole trader owing $40,000 of income tax and $25,000 of GST can apply for release of the $40,000 if the hardship test is met, and would still owe the $25,000. That is worth doing: releasing the income tax part may be what makes the GST plan affordable.
Get every activity statement lodged first. The ATO will not look at any relief on an account with unlodged BAS, and unlodged periods can also attract default assessments that overstate what you owe. More detail on the whole picture is at BAS debt.
What to do next
- Split your debt by type on your ATO statement of account: GST, PAYG withholding, PAYG instalments, income tax, interest and penalties.
- Set up or renegotiate a payment plan for the GST and PAYG withholding part so enforcement stops.
- Request remission of the general interest charge and any penalties on the BAS debt, in writing if it is a large amount.
- If there is an income tax component and you are in serious hardship, lodge a release application for that part only.
Related questions
Can a company get hardship release for any tax debt?
No. Release for serious hardship is only available to individuals and the trustees of deceased estates. A company's relief options are payment plans, remission of interest and penalties, small business restructuring, voluntary administration and liquidation.
Can PAYG withholding debt be waived if the business has closed?
Closing the business does not remove the debt. A sole trader remains personally liable and can deal with it through a payment plan, remission or, in serious cases, bankruptcy. A company's unpaid PAYG withholding can become the director's personal debt through a director penalty notice, even after the company stops trading.
Stuck with a BAS debt you cannot clear?
A specialist can work out the plan and remission combination that fits. Free, no obligation.
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