Using Caveat Loans to Pay Off ATO Tax Debt

By: Aaron Robbins0 comments

The ATO is now chasing tax debt that had been deferred during the beginning of COVID-19 — and they’ve got the power to report businesses to credit reporting bureaus.

If you need fast finance, loans don’t get much quicker than caveat loans.

During the height of COVID-19, the Australian Taxation Office (ATO) decided not to pursue collecting tax debts while so many businesses were struggling to make ends meet amid the economic and global health crisis.

As Australia opens up to international travellers, restrictions are eased, and we settle into a new normal, the ATO is now coming after businesses that had deferred paying their tax returns.

A caveat loan for business purposes might be the most effective way to pay off your tax debt.

caveat business loan

What happens if I don’t pay my tax debt?

There’s no avoiding tax debt — If you don’t pay, there are a number of consequences that you may have to face:

Credit reporting agencies may be notified

A bill amendment was made in 2019 that gives the ATO the power to report tax debts of over $100,000 to credit reporting agencies.

This has the potential to damage a business’ reputation and hinder its ability to access credit in the future.

You may receive a DPN

As a company director, you have a fiduciary duty to make sure all tax obligations are paid. GST, PAYG withholding and employee superannuation contributions all fall under the tax obligation umbrella.

While many businesses establish companies to limit their liability with the corporate veil, a Director Penalty Notice (DPN) is the ATO’s way of legally making the director liable for the company debt.

If you receive a DPN from the tax office, it’s essential to act quickly to avoid being held personally liable for company debt.

And no, winding up the company does not remove any personal liability transferred via a DPN.

You will be charged interest

If you don’t pay your tax bill on time, the ATO will apply a general interest charge (GIC) to the amount you owe.

The interest expense is compounded daily, which means your tax debt will be growing larger every day it is outstanding.

The interest rates charged may be higher than you would expect, and are updated quarterly.

two-women-holding-pen

What is a caveat loan?

A caveat is a lender’s registered interest in a property that is being used as security for a loan, but it operates differently from a regular mortgage.

You don’t need to own property outright to get a caveat loan; a caveat can be placed on title without requiring permission from the lender who holds the mortgage over the property.

Because no permission is needed, a caveat can be placed on the security property title quite quickly, with the funds being made available within days.

Unfortunately, because of the nature of Australian property law, it is not possible to place a caveat on overseas properties.

Caveat loans may also be known as an unregistered second mortgage.

One of the key differences between caveat loans and second mortgages is that the first mortgagee does not need to give permission for a caveat to be placed on title.

With a caveat in place, the homeowner is legally prevented from selling the property without getting permission from the lender.

Are caveat loans secured by property?

Caveat loans are secured by unencumbered property or a mortgaged property with equity.

The caveat acts as a statutory injunction that prevents the property owners from selling the property.

You are able to borrow a loan amount of up to 80% of the property value.

How can I use a caveat loan to repay my tax debt?

It’s important to repay your tax debt as quickly as possible — and caveat loan applications are known for their speed!

A caveat loan gives you fast access to funding and is secured against real estate property (either your family home or an investment property).

To apply for a caveat loan, simply fill in your details to request a callback, or call us on 1300 94 22 33.

Once we’ve heard from you regarding the details of your required finance, we will provide you with a quote detailing the loan terms.

Once your caveat loan is legally finalised, the funds will swiftly land in your nominated bank account, ready for you to use to pay down your ATO debt.

Your caveat loan application can be approved and settled in a few short days without a credit check — which is great for anyone worried about their credit history.

Caveat lending can put a smile on your face with you're short on cash

Benefits of using business caveat loans to repay your tax debt

When you’re late in paying your tax debt (or any other business debt!), it’s essential to act quickly to avoid any penalties.

Fast caveat loans in Australia are one of the quickest ways to get your cash flow moving when you need it urgently.

Because caveat loans are offered through private lending, they can avoid the hassles that come with applying for a loan amount through a traditional lender.

Faster than bank loans

Traditional lenders are known for their rigid assessment criteria and processes. They require a significant amount of paperwork and favour high credit scores.

With all the red tape of mainstream lenders, it’s not uncommon for a loan to take months to settle; caveat loans settle faster — much faster.

If you need cash quickly and have equity in a property, we can organise a caveat loan for you in a matter of days with our simple application process.

Once your caveat loan is repaid, the caveat is removed simply and quickly without any complicated paperwork.

Bad credit history doesn’t mean you’ll be knocked back

When you access a loan through private lenders, you are not subjected to the often harsh credit assessment that traditional lenders perform.

Caveat loans can be provided with no credit check, so they’re easier to obtain than traditional business loans.

Flexible terms

With a short term caveat loan, you have the power to negotiate your loan term — usually from anywhere from one month up to two years.

Short term caveat loans have the potential to be very short, or can cover a number of years if you need.

Easier than accessing equity from your existing mortgage

If you have sufficient equity built up in your real estate property (which may be the subject of a first mortgage), it may seem like a good idea to release equity from your property value.

However, to do this, you’ll need to refinance the existing mortgage, which means your application will be subject to your bank’s lending criteria.

If you need the cash urgently, or you doubt you’d meet the lending criteria, it might be best to look elsewhere — like caveat loans!

Caveat loans assist with boosting cash flow

Why use a caveat loan to pay off tax debt?

With the ATO commencing active debt collection, it is vital to act fast to pay off your tax debt.

A caveat loan application is simple, fast, and is not subject to the assessment process other lenders require.

If you’re looking to apply for a caveat loan, we’re sure you’ll find the process much more hassle-free than the process for more traditional loan products.

Seek advice if you need it

If your tax debt situation is a complicated one, it might be a good idea to get legal or financial advice.

As mentioned earlier, winding up a company doesn’t get you out of paying the tax debt if a DPN has been issued.

This situation may call for input from professional advisers.

We’re here to help

If you’d like to discuss your suitability for a caveat loan, please contact us today.

With a caveat loan, you can avoid any harsh penalties handed out by the ATO and ensure they are off your back for good.

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