Timely opportunity for your self-employed clients looking to tackle their tax debts
The end of the financial year is usually treated as a celebration, with many looking forward to tax return refunds and savings at the stocktake sales.
But for some small business owners and self-employed workers, it’s a different story. The end of financial year typically means a lot of paperwork and many ending up with an unexpected tax debt or one that was larger than expected.
According to a new report released by the Inspector General of Taxation and Taxation Ombudsman, collectible debt owed by small businesses to the ATO has reached an all-time high, with SMEs owing $21 billion to the ATO, and the average small business owing over $135,000.
Additionally, the Australian Small Business and Family Enterprise Ombudsman Bruce Bilson has reported that the ATO is signalling plans to return to collection action, which it relaxed during the pandemic.
This is where brokers can provide their assistance. As consumer confidence and business trading conditions continue to improve throughout 2021, self-employed customers have an opportunity to get on top of – and even ahead of – their tax debts with your help.
How can your clients get out from under their tax debt?
Research conducted by Resimac1 showed that 21% of surveyed mortgage holders weren’t aware they could consolidate Government debt into a mortgage.
This suggests an opportunity to educate SME clients on strategies to help them manage and minimise outstanding business tax debt through the use of a mortgage.
There may be benefits to paying off tax debts by using a Resimac Specialist mortgage product (Full Doc or and Alt Doc) product now, instead of your client waiting until they can pay it off by their own means and prolonging the period of debt.
In addition to enabling the client to clear their debt with the ATO, in many cases, a Resimac Specialist loan provides them with a lower interest rate (as at the time of publishing) compared with that offered by the ATO .
Anecdotally, a common strategy that our BDMs have observed is the customer presenting the ATO with a clear strategy of how they can pay off their ATO debt, potentially facilitated by a Specialist loan, and the ATO may be willing to compromise on the outstanding amount of debt owed – for instance, giving the customer a discount for paying early.
As such, this discount could potentially far offset the interest incurred on any loan, putting that customer in a better financial position when the dust settles.
“Small businesses are strongly encouraged to get on the front foot by lodging now and reaching out to the ATO – either online or by phone - for a tailored payment plan, if having difficulties meeting payment obligations,” said Bruce Billson of IGTO.
Of course, each client has a different situation, and they should do their due diligence and consult with their accountant first before making any decisions or taking any actions.
How can you help?
As a broker, you may be in a position to help your existing self-employed clients by educating them on their options, which could include Resimac specialist finance.
Given you’re not always privy to your customers’ current taxation position, nor can you give financial advice, it may be worth engaging your referral network of accountant partners as well.
Getting the word out about this timely opportunity can happen via targeted eDMs or a quick ring-around to your self-employed clients and accountant partners. You could also make this topic the focus of your coming newsletter.
This may also make for a good opportunity to co-run an educational event with your accountant referral partner for your collective SME clients.
Get in touch with your Resimac BDM or our Relationship Management team to find out more on how our Specialist mortgage options can help your self-employed clients get ahead of their tax debt.
This article does not constitute financial advice. You should consult with your tax professional before making financial decisions that may impact you or your business. (1) Lonergan. 2321 homeloans.com.au (Feb 2021), N: 1,063. *For new business only. Variable rate loans up to 70% LVR (unless otherwise stated). The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. WARNING: This comparison rate applies only to the examples given. Different amounts and terms will result in different comparison rates. Terms and conditions, fees, charges and lending or credit criteria apply.