Tax debt from a business I closed years ago: do I still owe it?

Does the debt still exist?

There is no statute of limitations on tax debt. It is a debt to the Crown, and the ATO can collect it ten or fifteen years on. What usually happened with a closed business is that the ATO put the debt on hold because it was uneconomical to pursue at the time. That is not forgiveness. An on-hold debt still exists, and the ATO has been re-raising post-2017 on-hold debts with six months of interest remitted, while pre-2017 on-hold debts have been written off. The way most people find out is a tax refund that never arrives, because refunds are offset against any debt, including one on hold. The guide to old debts reappearing explains the re-raise program in full.

One caution: the figure may not be right. Businesses that closed messily often have default assessments for unlodged BAS or returns, which are the ATO's estimates rather than your real result. Years of GIC at rates around 11.43% then compound on top. Lodging the missing returns, even now, can replace an estimate with a much smaller true figure.

Who owes it depends on how the business was set up

If you were a company director, check your ASIC address for anything you did not receive. A DPN runs 21 days from posting, not receipt, and a lockdown DPN for BAS lodged more than three months late can only be cleared by payment. The guide to debt after closing a business covers the detail.

What to do now

1. Get the statement. Log in to ATO online services or call 13 11 42 and ask for a statement of account showing how the balance is made up: primary tax, interest, penalties, and which periods.
2. Lodge anything missing. If any part of the debt is a default assessment, lodging the real return can cut it substantially.
3. Ask for interest to be remitted. A debt that sat unmentioned for years while GIC compounded is one of the stronger cases for GIC remission. Ask for the interest across the whole dormant period, not just the six months offered on re-raise.
4. Set up a payment plan. Online for anything under $200,000, sized to what you can keep.
5. Check hardship release. If you are an individual and the remaining debt is income tax, release on serious hardship grounds is possible. GST and PAYG withholding cannot be released, which for former sole traders is often most of the balance.
6. Weigh the last resorts honestly. Where a personal GST and PAYG debt is far beyond anything you could pay, bankruptcy does release it. It is a serious step, and a free financial counsellor on 1800 007 007 can talk it through.

What to do next

1. Call the ATO on 13 11 42 and ask for a full statement of account for the old debt, including which periods it covers and whether any of it is a default assessment.
2. Lodge any missing returns or BAS for those periods to replace estimates with real figures.
3. Ask for GIC remission across the dormant period, then set up a payment plan for what remains, or apply for hardship release if the balance is income tax.

More questions: 12 Life situations questions answered · Full guide: Can't pay your tax bill