1. Payment and Recovery of Tax
Chapter 11
Payment and Recovery of Tax
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Payment of Tax
An individual’s income tax is due for payment:
21 days after the due date for lodgement of the taxpayer’s income tax return or
21 days after service of the Notice of Assessment, whichever is later.
The 21 days is the minimum period and the ATO often specifies a date for payment that is more than 21 days after the service of the Notice of Assessment.
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Payment of Tax
Method of Payment
An income tax liability can be paid by mailing a cheque or money order with the payment slip to the ATO, by credit card using the Government EasyPay website or telephone service, at any Australia Post office by cheque, EFTPOS (subject to daily limits) or cash (up to $3,000), by BPAY®, or by direct credit or direct debit.
Payments cannot be made in person at any ATO site.
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Payment of Tax
Interest on early payments
The ATO is required to pay interest where income tax is paid by the taxpayer more than 14 days before the actual due date.
Early payment interest is payable at the following rates:
Period
Interest rate (% pa)
1 July 2013 to 30 September 2013
2.82
1 October 2013 to 31 December 2013
2.60
1 January 2014 to 31 March 2014
2.59
1 April 2014 to 30 June 2014
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5. Illustration: Calculation of early payment interest
Paul paid his 2012/13 income tax debt of $1,500 on 3 February His tax debt was based on the following dates:
15 October 2013
The ATO issued a Notice of Assessment which showed a tax debt of $1,500.
21 March 2014
Due date for payment of the tax debt.
Paul paid his tax liability at a post office on 3 February 2014.
Required:
Calculate the amount of early payment interest entitlement.
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6. Illustration: Calculation of early payment interest
Solution:
The early payment interest on $1,500 is calculated from 3 February, the date the assessment was paid, to 21 March the due date for payment (i.e. a period of 46 days) as follows:
$1,500 x
2.59%
46/365 =
$ 4.90
Therefore, Paul’s early payment interest is $ He must include this amount as assessable income on his income tax return for the income year the interest is refunded to him.
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Payment of Tax
Extension of time for payment
The ATO may grant an extension of time for payment of income tax, and/or may permit the tax to be paid by instalments.
Even when an extension of time to pay is granted, the ATO may nevertheless impose a General Interest Charge (GIC).
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Payment of Tax
Release from payment
Where a tax payment would cause a taxpayer serious hardship, they may apply for release from payment of the liability.
The ATO has the discretionary authority to grant such a release.
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Payment of Tax
Recovery of Tax
Income tax, when it becomes due and payable becomes a debt to the Commonwealth of Australia and unpaid tax after the due date attracts a penalty.
A taxpayer’s liability to pay tax is a civil liability.
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Payment of Tax
Rights of recovery
Persons Holding Money for the Taxpayer
Unpaid tax owing to the ATO may be recovered after written notice (“third party notice”) from the taxpayer or from any persons holding money on the taxpayer's behalf (e.g. banks) or who owe or may become liable to owe money to the taxpayer.
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Recovery of Tax
Rights of recovery
Liquidators and Receivers
A liquidator of a company or receiver for debenture holders must notify the ATO within 14 days of the fact of:
their appointment to the position, and,
taking possession of the company's assets.
The ATO will then advise of the total amount of tax due and payable.
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Recovery of Tax
Rights of recovery
Trustees of deceased taxpayers
The ATO may recover unpaid tax owing at the time of the taxpayer's death from the trustees of the deceased's estate.
Therefore, death is not a means by which to escape tax liability!
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