ATO debt business loans

Tax debt creeps up on small businesses. A big quarter, a slow one after it, a BAS that arrives at the wrong moment, and suddenly there’s a balance with the ATO that’s growing every month. Many owners carry it quietly for too long. An ATO debt business loan is one way to deal with it, but it isn’t the only way, and it isn’t always the best.

Your options for business tax debt

Option	Good when	Watch for
ATO payment plan	The ATO offers terms you can meet	Interest charges keep accruing
Unsecured business loan	Smaller debts, steady cash flow	Shorter terms, higher repayments
Property-backed loan	Larger debts, longer term needed	Property at risk
Short-term caveat loan	A known payment arriving soon	High cost if the exit slips
Restructure with advice	Debt is beyond what the business can carry	Professional advice essential

Start with the ATO. Many businesses can set up a payment plan online for smaller debts. If that works and you can meet it, it may be all you need.

Why some owners refinance tax debt

There are a few reasons owners look at clearing ATO debt with finance:

• Interest is no longer deductible. From 1 July 2025, the ATO’s general interest charge and shortfall interest charge can’t be claimed as a deduction, which changes the comparison with other finance.
• Credit reporting. The ATO can report business tax debts that meet certain criteria to credit bureaus, which can affect your ability to borrow and your relationships with suppliers.
• Director penalties. For companies, certain unpaid amounts like PAYG withholding and superannuation can become a director’s personal liability. Our page on company director loans explains more.
• A plan that isn’t working. If the payment plan keeps defaulting, a loan with fixed terms can be easier to manage.

What lenders need to see

Lenders are willing to help with tax debt, but they want clarity:

1. All lodgements up to date. BAS and returns lodged, even if not paid. Read lodging overdue BAS before you apply.
2. A current ATO portal statement showing exactly what’s owed.
3. Details of any payment plan and how it’s been met.
4. Evidence the business is viable beyond the debt, usually bank statements.
5. A plan so it doesn’t happen again, like setting aside GST weekly.

Unsecured or property-backed?

Smaller tax debts can often be cleared with an unsecured business loan assessed on bank statements. Larger debts usually need longer terms to keep repayments manageable, which is where a second mortgage or first mortgage can help. Lenders often pay the ATO directly at settlement, so the debt is cleared on the day.

An illustrative example

A Bendigo pharmacy owes $68,000 across two missed BAS quarters and a PAYG shortfall after a difficult year of staff changes. Its ATO payment plan defaulted once already. The directors own their home with equity. A lender clears the debt directly with the ATO through a loan secured against the home over three years, with a repayment the pharmacy’s now-steady takings can support. The directors also set up a separate account for GST. Illustrative only.

Stopping it happening again

Clearing a tax debt only helps if the next one doesn’t build up behind it. Lenders like to see a plan, and so does the ATO. The simplest habit is a separate savings account for tax: move a set share of every deposit into it, so GST and PAYG are already sitting aside when the BAS is due. Some owners switch to monthly BAS so the amounts are smaller and easier to manage. Cloud bookkeeping software that shows your GST position in real time also helps you see a problem coming before the quarter ends.

It’s also worth looking at why the debt arose. If it came from a one-off event, like a large job paid late or an unexpected staff cost, the fix is mostly about timing. If it came from the business regularly spending more than it brings in, a loan buys time but doesn’t solve the underlying problem. Be honest with yourself about which it is, because lenders will be asking the same question.

When a loan isn’t the answer

If the business is losing money and the tax debt is a symptom rather than the problem, adding a loan can make things worse. Speak with your accountant or a qualified adviser about the business’s position first. Business.gov.au has guidance on managing debt and where to find free financial counselling for small businesses.

Talk to us about your tax position

Tell us what’s owed, whether you’re up to date with lodgements and what the business looks like now. There’s no credit check to make an enquiry, your details aren’t handed to a crowd of lenders, and one real person reviews it and calls you. Be accurate about the debt and any payment plan so we can match you properly. Start your enquiry.