Cash to clear an ATO debt before it grows

ATO debt tends to creep. One quarter’s BAS goes on a payment plan, the next quarter is tight too, then there’s an income tax bill, and suddenly the balance is a number you’d rather not look at. Meanwhile, interest is growing every day.

Why is ATO debt more expensive than it used to be?

From 1 July 2025, the general interest charge (GIC) the ATO adds to overdue tax is no longer tax deductible. The ATO’s own small business guidance says that because GIC keeps accruing during a payment plan, a plan should be as short as possible to reduce interest.

That changes the maths. Leaving tax unpaid used to be partly offset by the deduction. Now it isn’t.

What happens if the debt keeps growing?

The ATO may report a business’s tax debt to a credit reporting bureau if:

• the business has an ABN and isn’t an excluded entity
• it has tax debts totalling at least $100,000 that are more than 90 days overdue
• it isn’t effectively engaging with the ATO to manage the debt (for example, through a payment plan it’s keeping to)

The ATO sends a written notice before it reports, and the business has 28 days from receiving it to take action. A reported tax debt can make suppliers, landlords and lenders more cautious.

What are your options?

Option	How it works	Things to weigh
ATO payment plan	Pay the ATO in instalments; under $200,000 may be set up online	GIC accrues and isn’t deductible; must keep to the plan
Unsecured business cash	Pay the ATO; repay a lender from takings	Sized on bank statements; ATO debt considered case by case
Property-backed cash	Clear the debt in full using equity	$20k – $5m; interest can be prepaid or added
Mix	Pay part now, plan the rest	Can reduce the plan length and GIC

There isn’t one right answer. The best option depends on the size of the debt, your cash flow, whether you own property and how quickly you can repay.

Tax debt hanging over the business? Tell us how much and what’s happening. We help with ATO debt every day.

When does clearing it with business cash make sense?

• The GIC is adding up and a short-term loan with a clear exit would cost less overall.
• A payment plan won’t fit your weekly cash, or the ATO wants instalments you can’t sustain.
• A notice has arrived about reporting the debt, and you want it cleared within the 28 days.
• You’re applying for other finance or contracts and want a clean ATO position.
• Several quarters have stacked up with other debts, such as cash advances, that also need consolidating.

For larger debts, property-backed cash is often the cleanest route because the security answers most questions and interest can be prepaid or added to the loan.

What will a lender ask about the ATO debt?

• How much is owed, and is it all lodged?
• Is there a payment plan, and is it being kept?
• Have any notices been issued?
• What caused the debt, and what’s changed?
• How will the new facility be repaid?

Honest answers make this easier, not harder. A debt that’s explained is far less worrying than one that’s discovered.

What documents help with an ATO debt application?

Lenders can move faster on a tax-debt situation when they can see the full picture in one go. Have these ready:

• An ATO statement of account (integrated client account) showing the balance, GIC and any payment plan.
• Recent BAS lodgements, so the lender can see the debt is fully lodged rather than estimated.
• Any ATO letters, including payment plan confirmations, reminders or a notice of intent to report the debt.
• Business bank statements for the period the lender asks for.
• Property details, if you’re looking at secured options: address, rough value, who owns it and what’s owing.

If your accountant or BAS agent manages your ATO account, ask them to download the statement for you. It saves a round of emails.

Does clearing the ATO help future borrowing?

Usually, yes. An unpaid or growing tax debt is one of the first things lenders, landlords and larger customers look for. Clearing it, or at least putting it on a plan you’re keeping to, tends to make the next conversation easier, whether that’s a bank refinance, a new lease or a supplier credit application.

It also removes a source of daily stress. Many owners say the biggest change after clearing a tax debt isn’t financial; it’s that they stop dreading the mail.

Stopping the next one

Once it’s cleared, set up a weekly tax set-aside so the next BAS is already covered. The BAS quarter crunch page shows how.

An illustrative example

Illustrative only. An Adelaide transport company owes $185k across three BAS quarters and an income tax assessment. It has received a notice that the debt may be reported. The directors own a commercial yard with good equity. A property-backed loan clears the ATO in full within the notice period, with interest added to the loan, and the plan is to refinance to a bank in 12 months once the books reflect the cleaner position.

Let’s get the ATO off your back

We work with business owners who have tax debts all the time, and we don’t shy away from it. Tell us what you owe and what’s been happening. The enquiry takes about a minute, and your credit file isn’t touched just for asking. We don’t send your details to a crowd of lenders, and a real person who understands ATO debt reviews your situation and calls you.

Please be accurate about the debt, any payment plan and any notices you’ve received. It helps us find the right fit first time.

Clear my ATO debt →