Who lends to clear an ATO debt?

Tax debt is one of the most common reasons Australian businesses look for finance, and one of the most common reasons banks say no. That combination creates a whole segment of the lending market that specialises in clearing ATO debts. Knowing which lenders sit in that segment, and how the ATO’s own rules affect the decision, saves a lot of wasted applications.

Why do business owners borrow to pay the ATO?

Owners usually look at finance to clear tax debt for one or more of these reasons:

• Interest cost. The ATO says GIC and SIC incurred on or after 1 July 2025 are no longer tax-deductible, which changes the comparison with a commercial loan for many businesses.
• Credit reporting. The ATO may report business tax debts to credit reporting bureaus where at least $100,000 is overdue by more than 90 days and the business isn’t effectively engaging with the ATO. A listing can make suppliers and other lenders wary.
• Escalation. Unmanaged debt can lead to firmer action, which owners want to avoid.
• Cash flow. Rolling a large debt into one structured repayment can be easier to manage.

Which lender types fund tax debt?

Lender type	When it fits	What it wants
Private lenders	Property equity, urgency, untidy paperwork	Equity and an exit plan
Caveat and second-mortgage lenders	Equity behind an existing home loan	Equity, short-term exit
Non-bank lenders	Longer term, property-secured	Reasonable records, property security
Online lenders	Smaller debts, steady trading	Clean bank statements, turnover
Banks	Only with a current payment plan, typically	Full financials, clean credit

Payment plan, loan, or both?

The ATO allows businesses that owe $200,000 or less to set up a payment plan through online services; larger debts or plans that can’t be set up online require contacting the ATO. A payment plan that you comply with also keeps you out of the debt-disclosure rules. Sometimes the best outcome combines both: a payment plan now to stabilise things, then a loan to clear the balance once security or refinancing is in place. Your accountant should weigh the costs in dollars.

Want to understand which option suits your tax position? Ask a specialist — there’s no credit check to ask.

What will a lender ask for?

• An ATO statement of account showing the full debt and any payment plan.
• Lodgement status: are BAS and tax returns up to date? Lenders worry about debts that haven’t been assessed yet.
• The reason the debt built up — growth, a bad debt, a one-off event — and what has changed.
• Evidence the business can stay current with future tax.
• Property details if the loan will be secured.

Our guide on tax returns, lodgement and borrowing explains why lodgement status matters so much to lenders.

Why are tax-debt loans declined?

• Returns and BAS not lodged, so the true debt is unknown.
• No property security for a large amount.
• The business is still falling behind on current tax.
• Other creditors chasing, or legal action under way.
• No credible plan to stay current after the debt is paid.

How do you present a tax debt to a lender?

Be completely transparent. Bring the ATO statement, explain the cause in two or three sentences, show what’s changed, and lodge anything outstanding before you apply if you can. Lenders who fund tax debt see it every week; what worries them is surprise, not the debt itself.

An illustrative example

Purely illustrative, with no real business: a family-owned transport company owes the ATO a large sum after a year in which a major customer collapsed owing it money. Its returns and BAS are lodged, but the debt has no payment plan and the owners have received a notice warning that it may be disclosed to credit reporting bureaus. The bank won’t refinance while the debt is outstanding. The owners use equity in their home through a second-mortgage lender to clear the debt within the notice period, then put a longer non-bank loan in place six months later once their bank statements show the business staying current with BAS. The total cost is weighed against the non-deductible interest the ATO would otherwise have charged, and the business avoids a credit listing that would have worried its fuel suppliers.

What happens after the debt is cleared?

Lenders look closely at whether new tax debt starts building again. Set up a separate account for GST and PAYG withholding, transfer money into it each week, and pay BAS on time. A clean ATO record for the next few quarters is what opens cheaper refinancing later.

Quick checklist before you approach a lender about tax debt

• An ATO statement of account showing every debt and any payment plan.
• Confirmation that BAS and returns are lodged, or a date for any outstanding.
• A two- or three-sentence explanation of how the debt arose.
• Property details if you can offer security.
• Recent bank statements showing current BAS being paid.

Ready to deal with the ATO debt?

If tax debt is weighing on the business, the sooner you look at options the more of them you’ll have. Send a 60-second enquiry with the amount owed, whether there’s a payment plan and any property you could use, and a specialist will tell you which lender type is realistic. Asking doesn’t touch your credit file, your details aren’t fired off to a list of lenders, and honest, accurate answers help us find the right fit first time.