What should I do if I owe the ATO money?

If you owe the ATO money, the first step is to confirm the assessment is correct. Review your notice of assessment carefully to ensure income and deductions have been reported accurately. If the amount is correct, contact the ATO before the due date or as soon as possible to discuss payment options. Ignoring an ATO tax debt allows interest to accrue and increases the risk of enforcement action. If the amount appears incorrect, you may need to amend your return or lodge an objection within the required timeframe.

How long can you be in debt with the ATO?

There is no fixed time limit on how long you can be in debt with the ATO. A debt remains payable until it is settled, placed into a payment arrangement, formally disputed, or released in limited hardship circumstances. However, interest continues to accrue while the balance remains unpaid. The longer an ATO tax debt remains outstanding without engagement, the more likely enforcement action becomes. Early communication significantly improves your available options and flexibility.

Can the ATO take money from your bank account?

Yes, the ATO can issue a garnishee notice requiring a bank to transfer funds from your account toward an unpaid tax debt. This action typically occurs after earlier contact attempts have failed. Garnishee notices may also apply to wages or amounts owed to your business by third parties. The ATO generally prefers engagement and payment arrangements over enforcement, but ignoring correspondence increases the likelihood of this outcome. Structured repayment discussions can often prevent escalation to this stage.

Does owing the ATO affect your credit score?

For individuals, owing the ATO does not automatically affect your credit score. However, in certain circumstances, eligible business tax debts may be disclosed to credit reporting bureaus if specific thresholds and conditions are met. This can impact a company’s creditworthiness and financing capacity. Maintaining active communication and compliant lodgements reduces the risk of disclosure. Addressing unpaid tax proactively is far more effective than allowing it to escalate to formal reporting stages.

Why do I owe the ATO money for Medicare levy?

You may owe the ATO money for Medicare levy or Medicare levy surcharge if your income exceeded certain thresholds and insufficient tax was withheld during the year. The surcharge can apply to higher income earners without appropriate private health insurance cover. Because it is calculated when you lodge your return, it can create an unexpected tax bill. Reviewing income projections and health insurance status during the year can help prevent recurring Medicare-related balances.

Can the ATO waive interest?

The ATO may remit interest in limited circumstances, but it does not automatically waive interest on unpaid tax. A formal remission request is required, and you must demonstrate valid reasons such as circumstances beyond your control. Since January 2026, specific application forms are required when requesting remission of interest or certain penalties. Each case is assessed individually, and approval depends on evidence and compliance history.