Article Highlights
- The ATO typically gives you 21 days to pay after your Notice of Assessment, but you can arrange a payment plan online if your debt is under $200,000
- Late lodgement penalties start at one penalty unit for every 28 days overdue (capped at five units), plus the general interest charge compounds daily on unpaid amounts
- You can request penalty remission if you have valid reasons like natural disaster, serious illness, or if your registered tax agent caused the delay
Here’s what you need to know about how to set up payment plan ATO options, what penalties you might face, and how to protect yourself from mounting debt.
First, check your actual due date and lodgement status
Before you panic, work out exactly when your tax bill is due. If you prepared and lodged your own tax return, the ATO typically gives you 21 days from the date on your Notice of Assessment to pay. For returns lodged on time during the standard lodgement period, the due date is usually 21 November.
The clock starts ticking from that due date. Once it passes, the general interest charge (GIC) kicks in and compounds daily. Since 1 July 2025, GIC and shortfall interest charge are no longer tax-deductible, which means every day of delay is costing you money you can’t claim back.
Check whether you’ve lodged all your outstanding tax returns and BAS statements too. The ATO is more likely to approve a payment plan if your lodgements are up to date. It shows good faith that you’re trying to get things sorted.
How to set up an ATO payment plan step-by-step
Setting up a payment plan with the ATO is more straightforward than most Perth business owners think. If your tax debt is $200,000 or less and you need up to two years to pay it off, you can usually arrange it yourself online without speaking to anyone.
Here’s how it works:
Log into your ATO online services through myGov (for individuals and sole traders) or the business portal. You’ll need your tax file number or ABN, details of the amount you owe, and your bank account information handy.
The system will ask you to propose an upfront payment (even a small amount helps) and then regular instalment amounts. Be realistic about what you can afford each month. The ATO might counter-offer if your proposed instalments seem too low, but they’d rather have a sustainable plan than one you’ll default on.
Once approved, set up direct debit so payments come out automatically. The ATO can also send you SMS or email reminders before each instalment is due. Staying on schedule is important because defaulting on a payment plan can trigger stronger recovery action.
What if you owe more than $200,000 or need longer than two years?
You’ll need to phone the ATO’s Lodge and Pay line. They’ll ask for evidence of your cash flow situation, like profit and loss statements or a budget forecast. This is where working with a registered BAS agent can help. We deal with the ATO regularly and know exactly what documentation they need to see.
For Perth businesses, remember the time zone advantage. You can call the ATO until 6 pm AEST, which is 3/4 pm our time (depending on the time of year), so get in early if you need to speak with someone.
Late lodgement penalties and interest: what you’re up against
If you lodge your tax return or BAS late, you’ll cop a failure to lodge (FTL) penalty on top of any tax you owe. The ATO charges one penalty unit for every 28 days your lodgement is overdue, capped at a maximum of five penalty units for individuals and small entities.
Penalty units are indexed each financial year. The current value is published on the ATO website, and it’s not small change. For medium and large entities, the multipliers are even higher.
Here’s the thing, though. Even if you can’t pay, lodge anyway. The failure to lodge penalty applies whether you owe money or not. If you’re expecting a refund and lodge late, you usually won’t face an FTL penalty unless the ATO has already issued you a notice to lodge. But if you owe tax, every day of delay adds both penalties and interest.
The general interest charge is separate from the FTL penalty. It accrues daily on any unpaid amount from the due date until you’ve cleared the debt. Even if you’re on a payment plan, GIC keeps ticking over on the outstanding balance, which is why paying as much as you can upfront makes sense.
Can you get fines or interest remitted? Yes, here’s how
If you’ve been hit with late lodgement penalties, you might be able to get them reduced or wiped through penalty remission. The ATO will consider remission requests if you have a valid reason for the delay.
Common grounds the ATO accepts include:
- Natural disaster (like the Kimberley floods in 2023 that affected WA businesses)
- Serious illness or hospitalisation
- Death of a family member or business partner
- Your registered tax agent was seriously ill or died
- System outages or technical issues beyond your control
You’ll need supporting evidence. That might be a doctor’s certificate, insurance claim documents, or a letter from your tax agent. Lodge all your overdue returns first, then submit your remission request through the ATO’s secure mail system in online services.
For penalty amounts under $10,000, you can request remission by phone. Over that amount, you’ll need to put it in writing with detailed reasons and documentation.
There’s also safe harbour protection if the delay was caused by your registered tax agent’s illness or incapacity, provided you gave them everything they needed on time. This is one reason working with professional bookkeeping support matters. If something goes wrong, you’ve got documentation and protection.
When a registered BAS or tax agent can help
Dealing with tax debt and ATO negotiations can feel overwhelming, especially when you’re already juggling the day-to-day demands of running a business. This is where bringing in a registered BAS agent or tax professional makes sense.
We can lodge your outstanding returns and BAS statements quickly to stop penalties from growing. We’ll work out exactly what you owe, help you prepare realistic cash flow projections, and negotiate with the ATO on your behalf. The ATO is often more receptive when dealing with registered agents because they know we understand the system and lodgement requirements.
If you’re a sole trader or small business owner in Perth who’s fallen behind, we’ve helped plenty of WA businesses get back on track. We’ll handle the paperwork, the phone calls, and the stress so you can focus on keeping your business moving forward.
Tax obligations don’t disappear, but they don’t have to bury you either. Getting ahead of the problem, lodging what’s outstanding, and setting up a realistic payment plan gives you breathing room and protects you from harsher recovery action down the track.
Need help sorting out your tax debt or setting up a payment arrangement? Get in touch with our Perth bookkeeping team and we’ll work through your options together.
Questions Meet Answers
How long does the ATO give you to pay a tax bill?
Generally, you have 21 days from the date on your Notice of Assessment to pay your tax bill. If you can’t pay within that timeframe, you can arrange a payment plan before the due date to avoid or minimise the general interest charge. Online payment plans are available for debts up to $200,000 over a maximum two-year period.
What happens if I lodge my tax return late but I’m owed a refund?
If you’re expecting a refund and lodge late, you usually won’t face a failure to lodge penalty unless the ATO has already issued you a formal notice to lodge. However, lodging late delays your refund, and if the ATO has requested your return, penalties can still apply even when you don’t owe tax.
Can sole traders set up a payment plan online?
Yes. Sole traders can set up a payment plan through the ATO’s online services via myGov, provided the total debt is $200,000 or less, you need two years or less to pay it off, and you have a reasonable recent compliance history. You’ll need your tax file number, bank details, and a realistic instalment proposal ready.
Is interest still charged while I’m on a payment plan?
Yes. The general interest charge continues to accrue daily on your outstanding balance even while you’re making regular instalments under a payment plan. The sooner you can pay down the debt, the less interest you’ll accumulate overall. Since GIC is no longer tax-deductible, minimising it should be a priority.
What are common reasons the ATO accepts for penalty remission?
The ATO commonly accepts remission requests based on natural disasters (like floods or bushfires), serious illness or hospitalisation, death of a family member or business partner, illness or death of your registered tax agent, or significant system failures beyond your control. You’ll need to provide supporting evidence like medical certificates, insurance claims, or statutory declarations, and all outstanding lodgements must be up to date before requesting remission.
