ATO Tax Debt Finance: How Australian Businesses Refinance an ATO Debt
An unpaid ATO tax debt is one of the most expensive liabilities a business can carry, and since 1 July 2025 it costs more than it used to. This guide explains how ATO debt finance works, what your options are, and what lenders look for.
ATO tax debt finance is a business loan used to pay out an outstanding debt to the Australian Taxation Office, so the liability sits with a commercial lender on agreed terms instead of accruing the ATO general interest charge. It is also referred to as an ATO debt loan, ATO debt refinance, or tax debt funding.
The concept is simple. A lender advances funds, the ATO debt is paid out (in many cases the funds are paid directly to the ATO), and the business repays the new facility through regular repayments over a set term. What changes is not the amount owed but the cost, the structure, and the pressure.
This guide is general information for Australian business owners. It is not tax advice. Anything relating to your tax position, deductibility or lodgement obligations should be confirmed with your accountant or directly with the ATO.
Why carrying an ATO debt now costs more than it used to
Two things make an unpaid tax debt harder to sit on today than it was a few years ago.
The general interest charge compounds daily
The ATO applies the general interest charge (GIC) to any tax liability that is unpaid after its due date. It compounds daily and the rate is reset by the ATO each quarter. A shortfall interest charge (SIC) applies separately where an amended assessment reveals you underpaid. Because the rate moves, check the current figure on ato.gov.au rather than relying on a number quoted on a website.
ATO interest is no longer deductible
Under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, GIC and SIC incurred on or after 1 July 2025 are no longer tax deductible, regardless of which income year the underlying debt relates to. That removes an offset businesses previously relied on. How this affects your position is a question for your accountant.
The practical effect is that the ATO has become one of the more expensive creditors a business can have, and unlike a commercial facility it does not offer a fixed term, a structured amortisation, or any flexibility once enforcement begins.
What an unpaid ATO debt can trigger
Beyond the interest, an ATO debt has consequences that reach into your ability to borrow, trade and hold contracts.
Disclosure to credit reporting bureaus
The ATO may report business tax debt information to registered credit reporting bureaus where the business has an ABN and is not an excluded entity, has one or more tax debts of which at least $100,000 is overdue by more than 90 days, is not effectively engaging with the ATO, and has no active complaint with the Tax Ombudsman about the intended disclosure. A formal intent to disclose notice is issued before any reporting occurs.
Effect on commercial credit assessment
Once a tax default appears on a commercial credit file, banks, equipment financiers, trade suppliers and insurers can see it. That can affect trade credit terms, supplier limits, equipment finance approvals and tender eligibility long after the debt itself is dealt with.
Director penalty notices
The ATO can issue a director penalty notice making a director personally liable for unpaid PAYG withholding, GST and the superannuation guarantee charge. These are time sensitive. If you have received one, speak with your accountant or a registered insolvency practitioner without delay.
Garnishee notices
The ATO can issue a garnishee notice to a third party that holds money for you, including a bank or a debtor, directing that funds be paid to the ATO. This can interrupt working capital with little warning.
Statutory demands and recovery action
Where a debt remains unaddressed, the ATO can escalate to formal recovery, including statutory demands and court action. Engaging early keeps far more options open than responding late.
Lender knock-backs on other applications
Unpaid tax and outstanding lodgements are among the most common reasons an otherwise sound equipment or vehicle finance application is declined. Clearing the tax position often unlocks the rest of the funding you need.
What types of ATO debt can be refinanced
Lenders generally assess the total position rather than each liability in isolation. The following are commonly considered.
BAS and GST arrears
Outstanding business activity statement liabilities, including accumulated GST, are the most frequent driver of an ATO debt loan enquiry.
PAYG withholding
Amounts withheld from employee wages and not remitted. This category also sits within director penalty notice exposure.
Company and personal income tax
Assessed income tax debt for the company, and in many structures the director or sole trader personally.
Superannuation guarantee charge
Unpaid or late employee superannuation, including the associated charge and administration components.
Fringe benefits tax
FBT liabilities that have fallen behind, often alongside vehicle and employee benefit arrangements.
Penalties and accrued interest
Administrative penalties, general interest charge and shortfall interest charge that have accumulated on the underlying debt.
Finance structures used to clear an ATO debt
There is no single product called an ATO loan. Several commercial structures can achieve the same result, and the right one depends on the size of the debt, the security available and how the business trades.
Unsecured business loan
A term loan assessed largely on trading performance and bank statement cashflow, with no property security taken. Typically suited to smaller ATO balances and businesses with consistent turnover. Terms are usually shorter, with regular repayments.
Property secured business loan
Funded against equity in residential, commercial or investment property held by the business or its directors. Security generally supports larger amounts and longer terms, at the cost of a slower settlement process involving valuation and legal steps.
Caveat or second mortgage facility
Short term funding secured behind an existing mortgage, used where speed matters and an exit is clearly identified, such as a property sale or a refinance already in progress. These are specialist facilities and the structure needs to be understood properly before proceeding.
Debtor and invoice finance
Releases funds tied up in unpaid customer invoices, which can be used to bring the ATO position current and then keep it current. Suited to businesses that invoice other businesses on terms. See our trade and debtor finance page.
Sale and leaseback of equipment
Unlocks capital held in plant, machinery or vehicles the business already owns outright, converting an owned asset into working capital while retaining use of it. Often overlooked by businesses that are asset rich and cash poor.
Working capital line or overdraft
A revolving facility that smooths the gap between BAS periods rather than funding a single payout. Frequently the right structure once the immediate debt is cleared, to stop the cycle repeating. See working capital and cashflow finance.
All finance is subject to lender approval, credit criteria, terms, fees and charges. Not all applications are approved and the structures above will not suit every business.
ATO payment plan or refinance
Both are legitimate paths. The question is which one your business can actually sustain.
An ATO payment plan
Keeps the liability with the ATO. The general interest charge continues to accrue and compound daily, and since 1 July 2025 it is not deductible. Payment plans are negotiated case by case, terms are often shorter than businesses expect, and default can bring the full balance back due immediately. It does, however, count as effective engagement, which is directly relevant to whether a debt is reported to credit reporting bureaus.
A commercial refinance
Moves the liability to a lender on a defined term with regular repayments and a known end date. It removes the compounding ATO interest from the picture and can take the pressure off the credit reporting and enforcement risk. It introduces a commercial cost, and it only works if the underlying business can service the new facility.
Refinancing does not make a debt disappear and it is not a fix for a business that is trading while insolvent. If you are unsure whether your business is solvent, that is a conversation for your accountant or a registered insolvency practitioner before you take on new finance.
What lenders look at on an ATO debt application
Requirements vary between lenders, but these are the factors that consistently determine what is available to you.
- ✓Lodgements up to date. This is the single most common blocker. Most lenders want current BAS and tax lodgements so the true size of the liability is known.
- ✓ABN and GST registration history. Length of trading and registration history influence which lenders will consider the file.
- ✓Trading performance. Recent bank statements and turnover, showing whether the business can service regular repayments alongside its normal obligations.
- ✓Size of the debt against turnover. A tax debt that is small relative to annual revenue reads very differently to one that is not.
- ✓Security available. Property equity, unencumbered plant and equipment, or a quality debtor book all widen the range of options.
- ✓Credit history and any existing defaults. Including whether the tax debt has already been disclosed to a credit reporting bureau.
- ✓Whether the debt is stable or growing. Lenders want to see the cause addressed, not just the balance paid.
- ✓A clear plan for staying current. The strongest applications show what changes after settlement, whether that is a working capital line, better BAS provisioning, or improved debtor terms.
Low document and alternative document options exist for businesses without full financials, generally assessed on bank statements and ATO portal information instead. Availability and criteria differ by lender.
Tax treatment: what to take to your accountant
We arrange finance. We do not provide tax advice, and the points below are general information only.
The deductibility change that took effect on 1 July 2025 applies to the ATO general interest charge and shortfall interest charge. It does not change the separate, long standing rules about how interest on borrowings is treated, which depend on the purpose of the borrowing and your circumstances. Whether a commercial facility used to pay a business tax debt is treated differently to the ATO interest it replaces is a question for your accountant.
Similarly, the timing rules matter. Interest is generally treated as incurred when the ATO issues the relevant assessment rather than as it accrues day by day, which can produce different outcomes either side of the commencement date. Your accountant or the ATO can confirm how that applies to your assessments.
The ATO also retains the ability to consider remission of interest charges in certain circumstances. Requests are assessed on their merits. Again, that is a conversation to have with your accountant or directly with the ATO on 13 28 66.
For current information straight from the source, see the ATO website at ato.gov.au.
How we work through an ATO debt enquiry
Understand the position
The size and composition of the debt, whether lodgements are current, whether an intent to disclose notice or director penalty notice has been received, and what security exists.
Match to the right lenders
Not every lender funds tax debt, and those that do have very different appetites. We identify which ones realistically fit your position rather than submitting broadly and collecting declines.
Structure and submit
We present the application with the supporting context lenders want to see, including how the business intends to stay current after settlement.
Timeframes depend on the structure and how complete your documents are. Unsecured applications with current lodgements generally move faster than property backed facilities that require valuation and legal work. We will give you an honest timeframe once we have seen your position.
Why work through a finance broker on this
Lender appetite is narrow and it moves
Tax debt is a specialist category. Knowing which lenders are active in it this month, and on what terms, saves you from a run of applications that mark your credit file without result.
Presentation changes the outcome
The same set of numbers can read as an unmanaged problem or a business addressing a known issue. How the file is framed and what supporting context sits with it genuinely affects the response.
The structure should stop it recurring
Paying out a tax debt without changing the cashflow pattern that created it tends to produce the same conversation in twelve months. We look at the facility alongside your working capital position.
Uloans Finance is an asset and commercial finance brokerage working with businesses across Australia, based in Pakenham, Victoria. We provide credit guidance, not tax or legal advice.
ATO tax debt finance FAQs
Can I get a business loan to pay an ATO debt?
What is the general interest charge on an ATO debt?
Is ATO interest still tax deductible?
Will an ATO debt show up on my credit file?
What types of ATO debt can be refinanced?
Do I need property security to refinance an ATO debt?
Is refinancing better than an ATO payment plan?
Can I still get finance if my BAS or tax lodgements are behind?
What is a director penalty notice?
How quickly can ATO debt finance be arranged?
Related finance options
Dealing with an ATO debt?
Tell us where things sit and we will tell you honestly what is available. No obligation, and no promises made before we have seen your position.