Quick answer
A business loan can pay out an ATO debt in one go, replacing it with a loan you repay on agreed terms. It's worth considering when an ATO payment plan won't fit, the debt is large, the ATO is escalating, or interest charges are building. ATO debt is considered case by case, and property-secured loans from $20,000 to $5,000,000 are a common route for larger debts.
Key points
- ATO online payment plans are available for business debts of $200,000 or less
- General interest charge incurred from 1 July 2025 isn't tax-deductible
- The ATO can report business tax debts over $100,000 overdue 90+ days if you aren't engaging
- Director penalty notices give 21 days to act
- A loan makes sense when it costs less, or protects more, than leaving the debt
The ATO is a patient creditor, right up until it isn’t. A tax debt that sits around gathers interest, can end up on your credit file, and for company directors can become personal. Using a business loan to clear it is a legitimate move. It just needs to be the right move for your numbers.
Option one: talk to the ATO first
Before borrowing, check whether the ATO’s own options suit you. The ATO says that if you owe $200,000 or less, you may be able to set up a payment plan through its online services. For larger debts, or if online setup doesn’t fit, you can speak with the ATO directly.
The ATO’s advice when you can’t lodge or pay on time is simple: contact it before the due date. Engagement matters, and you’ll see why below.
When does a business loan beat an ATO plan?
| Situation | Leaning ATO plan | Leaning business loan |
|---|---|---|
| Debt size | $200,000 or less, manageable | Larger, or plan repayments too heavy |
| Enforcement | None yet | Garnishee, DPN or legal action under way |
| Cost | Plan works out cheaper | Loan works out cheaper in dollars |
| Credit file | Not at risk | Reporting risk if engagement lapsed |
| Clean slate | Not a priority | You want the ATO paid and off your back |
One cost point has changed recently. Since 1 July 2025, the ATO’s interest charges (GIC and SIC) can’t be claimed as a deduction any more, and that applies to new charges on old debts too. That makes leaving tax debt running a bit pricier than it used to be. Ask your accountant how it affects you.
Brown envelope on the bench? Don’t let it sit. Tell us about the debt in 60 seconds. No credit check to enquire, and a real expert will help you weigh the ATO plan against a loan.
Why engagement with the ATO matters
Two rules raise the stakes for businesses that go quiet:
Credit reporting. The ATO says it can disclose business tax debts to credit reporting bureaus when a business has an ABN, has one or more tax debts with at least $100,000 overdue by more than 90 days, and isn’t engaging with the ATO to manage the debt. If you’re on a plan or actively working with them, they won’t report.
Director penalties. For companies, a director penalty notice can make directors personally liable for unpaid PAYG withholding, GST and super guarantee charge. The ATO says you have 21 days from when the notice is posted or left at your ASIC-registered address to take one of the available options.
Either way, the message is the same: act early. A loan arranged before enforcement starts is much easier than one arranged in a rush.
Repayment reality check (illustrative)
Invented example: a transport company owes the ATO $260,000 across BAS and PAYG withholding. It banks $320,000 a month and owns a depot with plenty of equity.
| Option | Total cost (made-up quote) | Term | Monthly repayment | Share of turnover |
|---|---|---|---|---|
| Secured business loan | $52,000 | 24 months | $13,000 | 4.1% |
| Same loan over 36 months | $78,000 | 36 months | $9,389 | 2.9% |
Either loan clears the ATO in one hit. The owner then needs a plan to keep current BAS and PAYG paid as they fall due, or the debt will simply rebuild. Our tax set-aside account guide is built for exactly that. Run your own numbers in the repayment planner.
Which loans are used for tax debt?
- Second mortgage business loans: keep your first loan, borrow against equity. See second mortgage business loans.
- Caveat loans: short-term, for a quick clear-out with a defined exit. See caveat business loans.
- Unsecured loans: possible for smaller debts when cash flow is strong, typically $5,000 to $500,000.
ATO debt is considered case by case. Property security widens the options considerably.
What our expert will ask you on the call
- How much is owed, and what’s it made of (GST, PAYG, income tax, super)?
- Are you on a payment plan, and is it being met?
- Has the ATO issued a DPN, garnishee or any other notice?
- Are current lodgements up to date?
- Do you own property, and what’s owed on it?
Myth or reality: tax debt and loans
“The ATO will always wait.” It is often willing to work with businesses that engage, but it can escalate with garnishee notices, director penalty notices, credit reporting and legal action when debts are ignored.
“Borrowing to pay tax is always a bad sign.” Not necessarily. It can be a sensible way to stop interest building and protect your credit file, provided the cause of the debt is fixed.
“I can’t get a loan while I owe the ATO.” ATO debt is considered case by case. Many lenders will help, particularly with property security or an existing ATO arrangement.
Clear it, then stay clear
A business loan that clears tax debt is only half the job. The other half is making sure it doesn’t come back.
Start step 1 and get it moving. It’s about 60 seconds, there’s no credit check to enquire, we don’t broadcast your details to a list of lenders, and a real expert calls you. Please be precise about what you owe the ATO and any notices you’ve received. Getting that right on the form is what lets us move quickly and match you properly.
Frequently asked questions
Should I use an ATO payment plan or a business loan?
Start by checking whether an ATO plan works for you. The ATO says businesses owing $200,000 or less may be able to set one up online. A loan can make more sense when the debt is larger, the plan repayments don't fit, enforcement has started, or you want a clean slate with the ATO.
Is ATO interest still tax-deductible?
No. From 1 July 2025 the ATO stopped allowing a deduction for GIC or SIC, so any of those charges that build up from that date onwards come straight off your bottom line, whichever year the tax debt belongs to.
Can the ATO report my business tax debt to credit bureaus?
Yes, in some cases. The ATO can report when a business has an ABN, at least $100,000 is overdue by more than 90 days, and the business isn't engaging with the ATO to manage the debt.
What is a director penalty notice?
It's a notice that can make company directors personally liable for unpaid PAYG withholding, GST and super guarantee charge. The ATO says you have 21 days from when the notice is posted or left at your ASIC-registered address to take one of the available options.
Can I get a loan if I already have an ATO payment plan?
Often, yes. Lenders look at how the plan is going, your cash flow and any security. Refinancing a plan into a loan can make sense if the loan terms suit the business better.