Can you negotiate a tax debt with the ATO?

What is genuinely negotiable

• The payment plan itself. Length, instalment size and whether an upfront amount is needed. Under $200,000 you can set one up online, but a plan that does not fit the ATO's standard settings is negotiated on 13 11 42. See how to negotiate a payment plan.
• General interest charge. GIC is currently 11.43% a year, compounding daily, and it can be remitted where the delay was caused by something outside your control or where remitting it is fair. Smaller requests are often decided on the phone; larger ones in writing. See GIC remission.
• Penalties. Failure to lodge and other administrative penalties can be remitted for a good reason, and a clean history helps.
• Enforcement. A garnishee notice is usually lifted or reduced once a plan is in place, and a firmer action process can be paused by engaging.
• Timing. Deferral of a due date, or a short breathing space, if you ask before the date passes.

What is not negotiable on a phone call

The amount of tax assessed. A call centre officer cannot knock 30% off your income tax because you asked nicely, and neither can an adviser. The original tax only changes if:

• The assessment is wrong, in which case you amend it or dispute the debt. A default assessment issued because you did not lodge is often overstated and is fixed by lodging.
• You are an individual in serious hardship and the debt is an eligible type, in which case you apply for release.
• The debtor is a company and goes through small business restructuring, voluntary administration or liquidation, where the ATO votes as a creditor.
• The ATO accepts a compromise, which requires showing it would recover less through insolvency.

Anyone who says otherwise is describing one of those processes without naming it, or is selling something.

How to prepare so the negotiation goes well

The ATO's decision-making turns on two things: your capacity to pay, and your history of engaging. Preparing for both makes a real difference.

1. Lodge everything outstanding first. Nothing is negotiated on an account with missing returns.
2. Know the split between original tax, interest and penalties, so you can ask specifically for remission of the last two.
3. Have a monthly cash flow figure and a proposal ready: how much upfront, how much per month, over how long. Offer what you can keep to, not the most you can imagine.
4. Write down the reasons for the delay in one or two sentences, with dates. Illness, a lost contract, a customer who did not pay, a disaster.
5. Ask for the officer's name and a reference number, and follow up any agreed remission in writing.

If you would rather not make the call, a registered tax agent can do it for you. What that costs, and when it is worth it, is covered at the cost of getting help. If you want to try yourself, start with what to say when you call.

What to do next

1. Pull your ATO statement of account and separate original tax from interest and penalties.
2. Work out a monthly amount you can reliably pay and a reason for the delay you can state in two sentences.
3. Call 13 11 42 or ask your tax agent to, and request a plan plus remission of GIC and penalties in the same conversation.
4. If the original tax is the problem and you are in real hardship or the company cannot trade out, look at release or restructuring rather than more phone calls.

More questions: 11 Forgiveness, hardship and negotiation questions answered · Full guide: ATO debt forgiveness