When money is tight, the Australian Taxation Office (ATO) has a process called “debt on hold” to support taxpayers experiencing genuine hardship. But recent changes mean these debts are now appearing in account balances, which may impact refunds and business cash flow.
Here’s what you need to know.
What is a Debt on Hold?
A debt on hold is when the ATO pauses recovery of an outstanding tax debt because paying it immediately would cause serious financial hardship.
- For individuals, this may apply if paying the debt means they can’t cover essential living costs.
- For businesses, it can apply if making payment would prevent them from meeting obligations like paying wages.
Important: A debt on hold is not cancelled — it still exists, and the ATO can collect it in the future.
What Has Changed?
The ATO has updated how it manages debts on hold. From now on, they will appear in your account balance.
Key changes include:
- Debts of $100 or more: Added to your balance after the ATO issues a notice letter.
- Debts under $100: Added automatically without notice.
- Interest charges: No interest applies for the first 6 months, but after that, a daily General Interest Charge (GIC) is applied.
- Refunds and credits: Automatically redirected to reduce these debts, even if you were relying on that refund for other purposes.
Currently, this applies to debts placed on hold after 1 January 2017, with proposals to extend to older debts as well.
Why This Matters for Individuals and Businesses
This change may seem administrative, but it carries real financial implications:
- Reduced refunds: Tax refunds or BAS credits may no longer be paid to you directly.
- Cash flow pressure: Businesses may struggle to cover payroll or supplier payments if credits are redirected.
- Growing costs: Interest can add up quickly after the initial 6-month interest-free period.
What Should You Do Next?
If you or your business has a debt on hold, it’s important to:
- Check your ATO account balance for any changes.
- Plan ahead for refunds or credits that may be redirected.
- Seek professional advice to manage cash flow and interest exposure.
At Certum Advisory, we help individuals and businesses understand and plan for ATO changes. Whether it’s reviewing your debt position, assessing cash flow impacts, or negotiating with the ATO, we’re here to support you
Need clarity on how these changes affect you?
Contact Certum Advisory today to safeguard your finances.
