What are the Real Consequences of having Overdue Tax Returns – Part 2
In Part 1 of this series on the real consequences of having overdue tax returns I discuss some of the more tangible short to medium term consequences. In this Part 2 I want to touch on some of the more intangible consequences.
Firstly, I want to draw a bit of a long bow here, but …
I actually liken the whole situation of people with poor tax lodgement histories with the ball tampering saga in the cricket recently.
In both cases I feel that perhaps the relative weak enforcement of the rules and laws, and the often soft (and subsequently revised down) consequences or wrong doing gives individuals a false sense of security, and I don’t necessarily mean the cricketers, nor most taxpayers, make a conscious decision to do the wrong thing because they think the consequences aren’t that bad (though I am sure that happens) but I think more subconsciously they don’t have the fear of the potential consequences that maybe they should. That then clouds their thinking and they don’t realise how bad their decision making is, until it is too late and they find out the (very) hard way!
Now that is not to say you can’t ever recover from a bad record with the ATO, the same way I am sure at least some, if not all, of the cricketers involved in sandpaper gate will recover and go on to have very good careers and probably even regain their standing with the public (and the riches that come with that).
But, you would much rather not have to go through that rebuilding process.
So if you are in the position of a bad lodgement history, don’t underestimate the damage it is doing to firstly your happiness, and secondly your health and then to your future prospects!
Whether you acknowledge it or not, even if you don’t admit it to anyone, even if you won’t admit it to yourself it will always be in the back of your mind and it will jump to the front at the most inopportune times. It will be adding to your stress levels, and blood pressure, without you even knowing it. You will be in a constant heightened state, and because it will develop over time you won’t even know it is happening. And the damage (outside of dollars and cents and court proceedings, etc) may well be occurring and building and you may well only learn about them once it is too late.
Then, you do need to consider the impact on your ability to do business, invest, borrow and achieve your goals into the future.
Again, problems with the ATO don’t necessarily have to be fatal, but they will result in unforeseen pain and do require a healing process.
Of course your standing with the ATO will be impacted and that impact will have a bearing on any dealings you may need to have with them in the future, at least into the medium term. If you need to negotiate a payment plan in the future, and sometimes there are very legitimate reasons why you may need to do so, then it is going to be harder to get approved. And even when you do, they are going to watch it much more closely and if there is a problem, they will act much more swiftly and more aggressively.
A similar thing will occur if you are even reviewed or audited. While past lodgement problems shouldn’t have a direct impact on the matter being looked at, you will be assessed as higher risk, meaning they will look more closely than they otherwise might. Of course the individuals working on your case will also, just naturally, take a more wary approach to you (and whether that is technically right or not, or allowed or not, no matter how many policy guidelines government bodies have in place, at the end of the day it is still people who make all the final decisions and people have subconscious bias’ and instincts which you can’t control).
Borrowing money from the banks and other lenders will also become more difficult. More and more (especially with what is going on right now with the Royal Commission) the banks are asking for more and more information and digging further and further including requesting more information about your tax affairs and history.
ATO issues can very easily result in declined loans, the banks naturally enough view them very poorly, or at best they could result in a higher risk rating against you and therefore a higher interest rate.
The last thing I want to mention is that if we are being frank, having a poor lodgement history with the ATO is a clear sign you, excuse the French, don’t have your shit together!
And if you don’t have things together, how can you possibly hope to get ahead in life, to be a financial success, to be a successful business owner. There are a lot of moving parts to building wealth and in particular building businesses, so if you can’t even get your tax returns sorted, how do you hope to get all the rest of the important things sorted (even if by being sorted that means being outsourced! Because you can very clearly outsource getting your taxes in order!).
So if you have financial and a prosperous lifestyle ambitions, this is the wrong way to go about it!
Of course there are plenty more potential consequences, most of which taxpayers never consider until it happens. So rather than harp too long, and make anyone with some outstanding returns get even more stressed, I will just repeat the line I previously stole from the TV series Billions …
“Sometimes the worst thing happening isn’t so bad”
So get your tax lodgements in order and then lets sort out any tax bill you may have and lets lift the weight from your shoulders and get you back on track for the future lifestyle you desire!