If you default on an ATO payment plan, the whole overdue balance becomes payable at once. If the ATO sends an arrears letter, it gives you a chance to act before the plan reaches that point.
On a $20,000 week, a $30,000 balance due at once is a week and a half of takings, before paying anyone who helped earn them.
We would treat an arrears letter as the most urgent thing in the myGov Inbox.
The arrears letter is your chance to act
Missing an agreed instalment, leaving another tax bill unpaid or not acting on an arrears letter can cause a payment plan to default.
A missed instalment can also leave the plan active but in arrears, which is the stage the arrears letter is for.
Read the letter for the minimum amount to pay now and any further action required. If you use myGov, it goes to your myGov Inbox first; if you have set your correspondence preference to your tax agent, it goes to them. Ask for the actual letter if someone else receives it, so you can read the payment instruction yourself.
For an upcoming instalment, online services let you change the due date, amount or payment method before it falls due:
- For direct debit via debit card, make the change at least 1 business day before the instalment date.
- For direct debit from a bank account, make the change at least 3 business days before the instalment date.
- You cannot change an instalment’s date or amount online if your current plan exceeds 24 months, or if the change would take it past 24 months.
Check the payment method as well as the date. After 30 June 2027, the ATO stops accepting credit card payments; payments attempted by credit card after that date will fail, and a linked plan can move into arrears or default.
What happens if you default on an ATO payment plan?
After a default, the ATO can start action to recover the whole overdue balance without further warning.
Before it issues a garnishee notice, the ATO sends a warning letter. The notice can require your merchant card provider to send the ATO a share of your EFTPOS and card receipts. If you make suitable alternative payment arrangements, the ATO may agree to withdraw or vary the garnishee.
We would ring the day the warning letter arrives, with an instalment the cash forecast says the venue can keep.
Credit reporting can apply when at least $100,000 is more than 90 days overdue and the business is not engaging with the ATO; keeping to a payment plan counts as engaging, and a notice of intent gives 28 days from receipt to act.
On a $30,000 balance, you are below that reporting line, so we would plan for the risk to card takings, not the credit report.
After a default, ring to renegotiate the plan
To renegotiate an existing plan, phone the ATO’s lodge and pay enquiry line. The ATO decides whether it accepts a new plan.
Expect extra questions if you have defaulted on or cancelled 2 or more payment plans in the past 12 months.
We would ring with a new weekly figure from the cash forecast below, and the reason the last one failed.
If you have defaulted more than once in the last 12 months, the interest-free plan for small business activity statement debts is closed to you.
If your venue trades through a company, its directors can be personally liable for unpaid PAYG withholding, GST and super guarantee charge. The ATO can recover director penalty amounts 21 days after the notice is posted or left at the address registered with ASIC, not when you open it.
Budget the instalment after this week’s bills
Tax refunds and credits reduce the debt but do not replace the required instalment.
Put a cash forecast beside your weekly P&L as part of your weekly hospitality accounting. Work through the venue’s week in this order:
- Start with expected bank deposits, not the POS sales total.
- Subtract the roster wages due for payment.
- Deduct the supplier run using the bills due, including food and beverage deliveries.
- Allow for rent when it falls due.
- Take out the super on those same wages, on the payday super timing.
- Reserve the BAS put-aside for current tax.
- Use the remaining cash to test the instalment, including the interest cost below.
Date every line. We would not count a weekend’s expected card deposits as money available for a supplier run that happens before those deposits arrive.
New tax debts must be paid in full and on time or put on a separate payment plan, and every lodgment must stay current. Leave the next BAS unpaid and the plan can default even with every instalment paid. We would not make an old debt repayment look affordable by leaving the next BAS out of the forecast.
We see ATO debt parked in a file and forgotten about, and on a plan the general interest charge (GIC) keeps compounding on it every day.
On a $30,000 balance, before any repayment:
- For October to December 2026, the daily GIC rate is 0.03153425%, equivalent to 11.51% a year.
- Multiply the balance by that daily rate: $9.46 for the first day.
- Add each day’s interest to the balance before calculating the next day: about $66 over a week.
- Continue that daily calculation for 30 days: about $285.
GIC incurred on or after 1 July 2025 is not deductible. That interest comes out of after-tax profit.
What we would do
- Today, open the arrears letter and pay the minimum it names; ring the ATO if you cannot meet its instructions.
- Before the next debit, request any instalment change within the online deadline for your payment method.
- Every week, move the BAS put-aside into a separate account before the supplier run.
- Have any director penalty notice read the day it arrives.
If we are your registered tax agent, we deal with the ATO for your venue as part of our ATO debt help and put a BAS put-aside figure on every weekly report.