Is a Debt Agreement the right solution for your Tax Debt?

If you have a personal tax debt between $50,000 and $137,537 that you can’t pay, then a Debt Agreement may help. With a Debt Agreement you can:

  • get the ATO to agree to a haircut on your tax debt
  • allows you to pay what you can reasonably afford
  • avoids bankruptcy

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    A Debt Agreement?

    A Debt Agreement is a legally binding agreement between you and your creditors. Here’s how it works:

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    You negotiate to pay a percentage of your combined debt that you can afford over a period of time.

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    You make repayments to your debt agreement administrator, rather than individual payments to your creditors.

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    After you complete the payments and the agreement ends, your creditors can’t recover the rest of the money you owe.


    with my Tax Debt?

    The ATO does not have the power to forgive the primary part of a persons tax debt. You may see or hear of debt forgiveness for individuals (persons) but that will refer to two situations:

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    forgiveness of penalties and interest and not the primary tax debt – so, a person cannot negotiate a reduction in primary tax debt.

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    Formal agreements to forgive a tax debt by using a formal insolvency procedure – and a Debt Agreement is one of those formal procedures!!!

    To be clear, this is not done by “negotiation” with the ATO, but rather through formal insolvency process under the Bankrutcy Act


    Debt Haircuts Can Be Achieved Through a Debt Agreement

    That’s the good bit. The ATO will consider a proposal put as part of a Debt Agreement on its merits. That means, the ATO will look at the proposal commercially and will likely accept what you can reasonably afford to pay.


    Eligibility Critera for a Debt Agreement


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    You are insolvent – can’t pay your debts as they fall due

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    The value of your property is less than $275,074

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    You’re total unsecured debts are less than (about) $137,537

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    You’re after tax income is less than $103,153

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    You haven’t entered a Debt Agreement or Bankruptcy in the last 10 years


    When to use a Debt Agreement

    For many years during and after COVID, companies traded on and the ATO didn’t pursue payment of the Company tax debt. Recently, the ATO has started issuing Director Penalty Notices to director’s of companies – those DPN’s can make a director personally liable for the tax debts of the company.

    So, we are finding many examples of directors that became personally liable for their company’s tax debt. Sometimes directors missed the DPN Notices and became aware when that liability appeared on their personal tax bill. If that tax debt debt is between $50,000 and $137,000 then a Debt Agreement may be the best solution.


    Yes it is! That’s why we suggest you:

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    Take our free online Tax Debt Solution analysis

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    Read more about Debt Agreements here

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    Contact Us

    Tax Law can be a complex area and circumstances vary, so we recommend a telephone call for your initial consultation. We will then gladly meet you or just confirm our advice and quote in writing.

    Please either give us a call or submit the form and we will get back to you.

    1300 659 691