Can the ATO refuse a payment plan?

Why the ATO says no

• Unlodged returns or BAS. The most common reason. The ATO will not formalise terms around debt it cannot see, and lodging on time is a condition of every plan.
• Previous defaults. Two or more defaulted or cancelled plans in 12 months removes online access, and an officer looking at that history needs a reason to believe a third will hold.
• The proposal does not add up. A long term with nothing upfront, or an instalment that leaves no room for the next BAS, reads as a promise the numbers cannot keep.
• No evidence of capacity to pay. For larger debts the ATO may ask for bank statements or a cash flow forecast. Refusing to provide them, or providing figures that show the instalment is unaffordable, ends the conversation.
• Firmer action is already under way. After a garnishee notice, a director penalty notice or a statutory demand has been issued, the ATO may decline a plan or insist on tougher terms. A payment plan does not remit a DPN.
• A pattern of using plans instead of paying. A taxpayer who has rolled debt from plan to plan for years may be told the ATO wants payment in full or a formal arrangement.

What to do if you are refused

1. Ask why, specifically. Officers will usually tell you which of the reasons above applied. Write it down.
2. Fix what can be fixed. Lodge the outstanding returns. Find an upfront payment. Shorten the term. Then propose again. A second proposal that addresses the stated reason is often accepted.
3. Bring evidence without being asked. A one page cash flow showing the instalment and the next BAS both covered. Bank statements if the debt is large.
4. Consider who makes the call. A tax agent or a specialist speaking for you can frame the situation differently and knows what the ATO's lodge and pay team wants to hear. See how to negotiate with the ATO.
5. Ask about a secured plan. Where the ATO will not agree otherwise, it can accept a registered mortgage over freehold property or an unconditional guarantee from an Australian bank as security. This is a significant commitment; get advice first.

Our page on rejected payment plans covers the re-proposal in more detail.

What a refusal usually tells you

A refusal is sometimes the ATO's way of saying the debt cannot be serviced alongside ongoing tax. If a realistic instalment plus your normal BAS does not fit inside your cash flow at any term, a payment plan is not the answer even if you could get one. A company with total liabilities under $1 million can look at small business restructuring, where the ATO votes on a formal proposal and has accepted well prepared plans even after refusing an informal one. Individuals and sole traders in serious hardship may have release options for some debt types; see ATO debt forgiveness. Rescue options compares all of them.

What to do next

1. Ask the ATO officer exactly which reason applied to the refusal and note it.
2. Lodge any outstanding BAS or returns before you do anything else.
3. Re-propose with something upfront, a shorter term and a one page cash flow that shows the next BAS is covered.
4. If a realistic plan does not fit your cash flow at any term, get advice on formal alternatives now rather than after enforcement starts.

More questions: 26 ATO payment plans questions answered · Full guide: ATO payment plans