Acquiring an ATO tax clearance certificate entails the requirement to get all your tax obligations completely up to date, assemble the relevant documents and submit an official application to the ATO. It acts as evidence that a person or business has no outstanding tax debts and as a result, can be a requirement in the selling of a business, applications for tenders, or if a person is permanently leaving Australia.
If you have never been involved in the process, then applying for an ATO tax clearance certificate may seem daunting. Whether it be winding up a business or applying for some government contracts, or simply winding up your tax obligations prior to leaving Australia, it is critical that you understand how to properly apply for your tax clearance certificate. This guide will outline the requirements, documents and steps to prepare you for a successful application and to help avoid delay.
1. What the certificate is and why you need it
The ATO tax clearance certificate is an official document issued by the Australian Taxation Office confirming an individual or entity has no outstanding tax liabilities/additional tax liabilities. It is generally needed whenever you are selling a business, applying for specific tenders, or ceasing operations. In some cases you will be asked to provide a tax clearance certificate when you permanently leave Australia to show you have satisfied your tax obligations in Australia. Before you begin your application it is worth checking whether you will actually need the certificate, you might be surprised at how often clearance will not be needed.
2. Ensure Your Tax Obligations are up to date
Before you apply, ensure everything has been lodged, that all tax returns, business activity statements (BAS), and any other lodgements required by law are complete. The ATO will not issue an ATO tax clearance certificate if your record shows that you have outstanding returns or tax debts owed. This includes ensuring all instalment activity statements, fringe benefits tax (FBT) returns and any payroll related obligations are lodged. In the event you do have a debts, contact the ATO and propose a payment arrangement; being able to show that you have made arrangements for payment may assist with you getting your tax clearance certificate.
3. Collate the Necessary Required Documents
If you prepare the required documentation before you begin, the application will take less time to be completed. Generally, you should be prepared to provide:
- * Your tax file number (TFN) or Australian business number (ABN)
- * Identification
- * Your business or employment status
- * Reasons for applying for a tax clearance certificate
- * Evidence of recent tax payments or statements
Planning the appropriate documents in advance will facilitate a faster application process. Generally, you will need:
- * Your tax file number (TFN) or Australian business number (ABN)
- * Identification documents
- * Information about your business or employment
- * Why you are applying to receive a tax clearance certificate
- * Recent tax payment records or statements
In addition to the above, businesses will need other documents like financial statements, deregistration forms, or liquidation notices. Having these documents prepared will avoid any potential delays once you make your official request.
4. Submit Application to the ATO
Applications for an ATO tax clearance certificate are usually made directly to the ATO through your tax agent or through the ATO’s Online Services. Tax agents will request the clearance certificate for you and make sure all supporting documentation is complete. If you apply yourself, be sure that each field is completed accurately Unrealized mistakes or missing information is often the reason to delay or deny the issuance of the tax clearance certificate.
5. Respond to ATO Requests Promptly
Once you lodge your application, the ATO may request your further supporting information. The information request could be a clarification for outstanding lodgements, income information or details related to your business closure. Responding to the ATO quickly will help ensure your tax clearance certificate is issued without long periods of inactivity.
6. Get your Certificate
When the ATO has verified your records, it will issue your ATO tax clearance certificate either electronically or by mail. Store it in a safe location and forward it on to the organization/authority that has requested it. This certificate will confirm that all of your tax obligations are up to date at the time of issuing.
7. Ensure future tax compliance
After you have obtained your tax clearance certificate, note that you may have future tax obligations if you continue in a business activity or earn income in Australia. Keeping proper records, timely lodgments and communicating effectively with the ATO will assist in minimizing a situation where and if you require another tax clearance certificate in the future.