Victorian legal guide

Can’t pay your ATO tax debt? Your options

General information for people and businesses in Victoria · ORLA Connect

A growing tax debt is stressful, but ignoring it makes things worse. The ATO has strong recovery powers — and several ways to work with you if you engage early. Here are the main options.

Don’t ignore it — what the ATO can do

Unpaid tax attracts the General Interest Charge (GIC), which compounds daily. If a debt is left unaddressed, the ATO can issue garnishee notices (taking funds from your bank account or wages), take court action, or — for company directors — issue a Director Penalty Notice. Engaging early gives you far more options.

Payment plans

The ATO can often agree to a payment arrangement that spreads the debt over time. Smaller debts can sometimes be set up online, while larger or business debts usually need negotiation. Interest generally still applies, but a plan stops enforcement while you keep to it.

Disputing the debt

If you think an assessment is wrong, you can lodge an objection within the time limit. If the objection is unsuccessful, you may be able to seek review at the Tribunal or the Federal Court. Importantly, a debt is often still payable while a dispute is on foot unless the ATO agrees otherwise.

Getting penalties and interest remitted

Where there were genuine reasons for falling behind, the ATO has discretion to remit (reduce or cancel) penalties and interest. A well-supported request — explaining the circumstances and showing you’re now engaging — can make a real difference.

Company directors: watch for a DPN

Directors can be made personally liable for a company’s unpaid PAYG withholding, GST and super through a Director Penalty Notice (DPN). Some DPNs can’t be avoided by later placing the company into administration, so directors should get advice the moment one arrives — the response window is very short.

How to get help the easy way

You don’t have to work out who to call. Post your matter on ORLA Connect and up to four verified Victorian tax lawyers review it and reply with how they can help and their fees. It’s free to post, private, and there’s no obligation to proceed.

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Common questions

Can I set up a payment plan for my ATO debt?

Often, yes. The ATO can agree to spread a debt over time; smaller debts may be arranged online and larger ones by negotiation. Interest usually still applies, but a plan pauses enforcement while you keep to it.

Can I dispute a tax debt I think is wrong?

Yes. You can lodge an objection within the time limit, and if unsuccessful seek review at the Tribunal or Federal Court. Note the debt is often still payable while the dispute is considered, unless the ATO agrees otherwise.

Can ATO penalties and interest be reduced?

Sometimes. The ATO has discretion to remit penalties and the General Interest Charge where there were genuine reasons for the delay. A well-supported request can help.

What is a Director Penalty Notice?

A DPN can make a company director personally liable for unpaid PAYG, GST and super. Some can't be avoided by winding up the company, and the response time is very short — get advice immediately if you receive one.

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This article is general information only and is not legal advice. Deadlines and thresholds can be strict and change over time — for advice about your situation, post your matter and a matched Victorian law firm can help.