Don’t let your ATO tax debt cripple your healthcare business

Business Insights

In the healthcare sector, we have noticed some complacency around overdue tax payments, particularly, for medical contractors who operate under an ABN, and failure to keep on top of tax obligations can very quickly see ATO tax debt rise. 

As we tick over into a new financial year, businesses across Australia should be taking stock…literally and figuratively. Don’t let your ATO tax debt cripple your healthcare business

After a difficult 2020 that put many on the back foot, the past 12 months have seen some return to normality with many businesses able to return to pre-COVID operations.

However, this return to normalcy is also being met by the end of temporary measures put in place to ease the burden on businesses during the pandemic.

This includes grace periods given by the Australian Tax Office (ATO) for outstanding tax debt.

The same applies to medical clinics and NDIS providers. There are some NDIS providers still struggling to re-align their operations with the requirements of the scheme and get control of business costs. After 8 years, this needs to be front of mind otherwise it could result in a failed audit and loss of NDIS status or even insolvency.

Healthcare insolvencies on the rise

According to the Australian Financial Security Authority’s May 2022 insolvency report, insolvencies within the healthcare and social assistance sectors rose 38.5% month on month

We recently saw the collapse of Tristar Medical – one of Victoria’s largest GP clinic chains. The company entered voluntary administration after coming under significant financial strain.  

ATO debt can be a trigger for insolvency, especially when overdue amounts are left to snowball and interest and penalties really start to add up.

Unfortunately, we sometimes see companies and sole traders resorting to fourth or fifth-tier lenders in an attempt to get control of debt and avoid dealing with the tax office – leaving them at the behest of loans with a 15-20% interest rate (a far cry from the 4 - 5% interest rate offered by the ATO under a payment plan).

How RSM can help?

Whether overdue tax payments are due to cashflow troubles or simply complacency, now is the time to take stock and regain control.If your healthcare business is having trouble with tax debt, contact your local health specialist.  You can pave a clear way forward and avoid steep penalties (or further actions) – and you don’t have to go it alone.

The skilled accountants and business advisers in RSM’s specialist healthcare team understand the unique challenges that healthcare businesses and professionals face.

We can work with you to ascertain your financial position and tax debt, and guide you on how best to move forward and meet your obligations.

You can also ask us to negotiate with the ATO on your behalf to determine an acceptable payment arrangement.

If your healthcare business is in severe financial trouble, we will explain the options available to you so you can make a confident decision about what’s best for yourself and your business into the future.

Contact your local RSM healthcare specialist about tax matters or cashflow concerns.