ATO Tax Debt and Business Lending: What a Payment Plan Does to Your Application
A tax debt is one of the most common reasons a business finance application is declined, and one of the most misunderstood. What matters to a lender is rarely the number. It is whether the debt is disclosed, whether you are engaging, and whether your lodgements are up to date.
The short answer
You can generally still get business finance with an ATO tax debt, and a payment plan usually helps rather than hurts. The ATO will not disclose a business tax debt to credit reporting bureaus where you are effectively engaging with it, and a payment plan being complied with counts as engaging. What a plan does to a lending application is make the debt visible, explained and quantified, which most commercial lenders prefer to a debt they discover themselves. The plan repayments do reduce your serviceability, because they are a real commitment. The two things that damage an application most are an undisclosed debt found during due diligence, and unlodged returns.
Work out where your debt actually sits
Before anything else, establish which of four positions you are in, because the answer changes what you should do next and how a lender will read it.
| Your position | Credit file exposure | What it means for finance |
|---|---|---|
| Under the reporting threshold, or not yet 90 days overdue | Not reportable on these criteria. | Most lenders will still ask about it and will see it in your ATO portal statements. Disclose it yourself. |
| Over the threshold, but you are engaging with the ATO | The ATO states it will not report where you are effectively engaging, even at $100,000 or more. | The workable position. The debt is a commitment rather than a red flag, provided lodgements are current. |
| Over the threshold, not engaging, notice received | A written notice of intent means a defined window to act before disclosure. | Act now. Engaging before the window closes is the difference between a visible default and a manageable liability. |
| Already disclosed to credit reporting bureaus | Visible to lenders, insurers and trade credit providers. | Harder, not impossible. The lender pool narrows and pricing changes. Getting the debt resolved and the record updated becomes the priority. |
Most business owners we speak to assume they are in the fourth row when they are actually in the first or second. The distinction is worth establishing before you assume finance is off the table.
When the ATO can put your debt on a credit file
Since 2019 the ATO has been able to disclose business tax debt information to credit reporting bureaus. It is not discretionary and it is not arbitrary. Every element of a defined test has to be met.
The ATO states it may report your business tax debt where all of the following apply:
- You have an Australian business number and are not an excluded entity.
- You have one or more tax debts and at least $100,000 is overdue by more than 90 days.
- You are not engaging with the ATO to manage your tax debt.
- You do not have an active complaint with the Tax Ombudsman about the ATO’s intent to report your tax debt information.
Three details in that test matter more than the headline number.
The threshold is an aggregate, not a single liability. The test looks at one or more tax debts. An activity statement balance and an income tax balance that each look survivable on their own can cross the line together. Business owners are frequently surprised by this because they think in terms of individual accounts rather than a total position.
Nobody is reported by surprise. The ATO says it will send a written notice if it plans to disclose. If a notice arrives, that is the moment to act rather than the moment to panic, and there is a window in which engaging will stop the disclosure.
Engaging stops it outright. The ATO is explicit that it will not report your debt information where you are already engaged with it to manage your tax debts, even where the debt is $100,000 or more. There is also a separate discretion not to report where you are experiencing exceptional circumstances.
What counts as engaging, which is broader than you think
Most people assume engaging means a payment plan. A payment plan being complied with certainly counts, and it is the most common route. But it is not the only one.
Engaging also generally covers an application for release from the debt, an active objection, an active review with the Administrative Review Tribunal, and an active Tax Ombudsman complaint about the debt itself. Whether any of these apply to your situation is a question for your accountant or registered tax agent, not for a broker, and the operative word in all of them is active.
The regime does not punish owing money. It punishes owing six figures, for months, in silence.
The corollary matters. A payment plan you agreed to and then defaulted on is not engagement. Where a plan lapses, the protection lapses with it, and the debt can move back into reportable territory. If you cannot meet a plan, the useful move is to contact the ATO before you miss the payment rather than after.
What a payment plan actually does to your application
This is the question in the title, so here is the direct answer in three parts.
It helps, because it converts an unknown into a known
Commercial credit teams are not shocked by tax debt. They see it constantly, particularly in trades, construction, transport and hospitality where income is lumpy and the activity statement cycle does not align with when customers actually pay. What they react badly to is a liability they were not told about and found themselves.
A documented plan gives an assessor a balance, a repayment, an end date and evidence of compliance. That is a liability they can model. An unquantified debt mentioned late in the process is a risk they cannot size, and the safe answer to a risk you cannot size is no.
It costs you serviceability, because the repayment is real
The plan repayment is a commitment, and it is treated as one. It reduces what the business can service just as an equipment finance repayment would. That is not a penalty, it is arithmetic, and it means the amount you can borrow is lower than it would be with no debt. Worth knowing before you set an expectation about loan size.
Lenders differ on whether they will refinance the debt itself
Some commercial and non-bank lenders will fund an ATO debt payout directly, treating it as a refinance of an existing liability. Others will lend for working capital but will not knowingly fund a tax liability. Some will require the debt cleared before settlement. This varies more between lenders than almost anything else in commercial credit, and it is the single most useful thing a broker can tell you about your own file.
Been declined, or expecting to be?
Tell us the balance, whether a plan is in place and where your lodgements sit. Fifteen minutes and you will know whether the debt is actually the problem, which lenders will look at a file like yours, and whether refinancing it makes sense. No obligation, and no fee at any point.
The three things a lender is really checking
The balance is rarely the deciding factor. These three are.
- Is it disclosed, and by whom. A debt you raise in the first conversation reads as transparency. The same debt discovered in your ATO portal statements after you said there was nothing reads as something else, and it affects how the assessor treats everything else you told them.
- Is the plan actually being met. A plan with a clean payment history is a credit positive because it demonstrates the business can meet a fixed commitment. A plan with missed payments is worse than no plan, because it shows a commitment was made and not kept.
- Are lodgements up to date. This is the one that quietly kills applications. The ATO generally requires all outstanding returns and activity statements to be lodged before it will agree to a payment plan, and lenders read unlodged returns as an inability to know your own position. A business that owes money and knows exactly what it owes is a different proposition from one that has not filed for eighteen months.
If you do only one thing before applying for finance, get your lodgements current. It is often more valuable than reducing the balance.
Why carrying it slowly got more expensive in 2025
Something changed here that a lot of business owners have not priced in.
Interest the ATO charges on overdue tax, the general interest charge and the shortfall interest charge, was historically deductible. From 1 July 2025 it is not. The ATO’s guidance on denying deductions for interest charges confirms the position, and it applies to interest incurred on or after that date regardless of which income year the underlying debt relates to. Interest accruing today on a debt from 2023 is non-deductible.
The practical effect is that the real cost of leaving a balance with the ATO rose materially without the headline rate moving at all, because the after-tax cost is now the full cost. General interest charge is set quarterly by the ATO and compounds daily, so check the current rate on the ATO site rather than relying on a figure quoted anywhere else.
That changes the arithmetic of the refinance question. Commercial finance that once looked more expensive than sitting on an ATO balance may no longer be, once the deduction is removed from one side of the comparison. Whether it stacks up for you is a calculation for your accountant with your actual numbers, and it is worth doing properly rather than assuming the answer is the same as it was two years ago.
Your options, and what each one costs you
| Option | When it fits | The trade-off |
|---|---|---|
| Pay it from cash reserves | Where the balance is modest relative to your working capital buffer. | Removes the cheapest problem and can create a more expensive one if it strips the buffer you need to trade. |
| ATO payment plan | Most situations. It stops disclosure and it is administratively simple. | Interest continues and is no longer deductible. The repayment reduces serviceability for other borrowing. |
| Working capital or cashflow facility | Where the underlying issue is timing rather than profitability, and the debt built up from a receivables gap. | Adds a facility with its own cost. Solves the cause rather than only the symptom, if the diagnosis is right. |
| Unsecured business loan | Where speed matters, no property security is available, or the amount is moderate. | Typically shorter terms and higher cost than secured lending. Fast, and priced accordingly. |
| Secured against property | Where there is equity available in business or personal real estate. | Cheaper, slower, and it puts an asset behind a debt that previously sat unsecured with the ATO. Not a small decision. |
| Invoice finance | Where the debt built up because customers pay slowly and the debtor book is solid. | Cost attaches to the receivables. Addresses the actual mechanism in businesses with long payment terms. |
Two observations from doing these regularly. First, the right answer usually depends on why the debt exists rather than how large it is. A timing problem and a profitability problem need different treatments, and finance applied to the second one buys time rather than fixing anything.
Second, moving a debt from the ATO into a secured facility is a genuine change in your risk position, not just a change in the interest rate. An unsecured ATO balance and a facility secured over your home are different things even at the same cost. Our cashflow and working capital page covers the timing-gap facilities, and unsecured commercial loans covers the route where no security is offered. If several facilities have accumulated alongside the tax debt, business debt consolidation may be the better frame.
What makes it materially worse
- Unlodged returns and activity statements. The single biggest avoidable problem. It blocks a payment plan, it reads badly to lenders, and it means nobody, including you, knows the real number.
- A defaulted payment plan. Worse than never having had one, because it evidences a broken commitment and it removes the engagement protection against disclosure.
- Director penalty notices. Where PAYG withholding, GST or superannuation guarantee amounts are involved, directors can become personally liable, and the options available depend heavily on whether the amounts were reported on time. This is a legal matter with tight timeframes, and it belongs with your accountant and solicitor immediately rather than in a broker conversation.
- Unpaid superannuation guarantee. Treated more seriously than other tax debt by both the ATO and by commercial lenders, and it sits inside the aggregate for the reporting threshold.
- Waiting for the notice to expire. The window after a notice of intent is the cheapest opportunity you will get. Once disclosure happens, the file is materially harder and the options narrow.
What to do, in what order
- Get the real number. A full ATO account balance across every account, not an estimate. If lodgements are outstanding, that is step one and it comes before everything else.
- Talk to your accountant before you talk to a lender. They can establish whether a plan, a remission application, an objection or a release application fits your circumstances, and they can run the refinance arithmetic now that the interest is non-deductible.
- Engage with the ATO, and document it. Whatever route your accountant recommends, get it in place and keep the evidence. That evidence is what a lender will want to see.
- Then talk to a broker about finance. With lodgements current, a plan documented and a payment history building, the conversation is completely different from the one that starts with an undisclosed balance.
- Fix the cause, not just the balance. If the debt built up because customers pay in ninety days and your BAS falls due in twenty-eight, refinancing the balance without addressing the timing gap means being here again next year.
Where Intellect Finance fits
Our part is the finance, and it is the last step rather than the first. We can tell you which lenders on our panel of more than 100 will look at a file with a tax debt, which will fund an ATO payout directly and which will not, what evidence they will want, and whether the numbers support the facility you are asking about. If we think the answer is that you should fix lodgements and build three months of clean plan history before applying, we will say that, because applying too early leaves a credit enquiry you cannot take back.
What we do not do is advise on tax. Whether to enter a payment plan, seek remission of interest, lodge an objection, or apply for release is your accountant’s territory and we will not step into it. The broader range of facilities sits on our commercial loans page.
Note that business and commercial lending is not regulated consumer credit, so Best Interests Duty does not apply to it. We still charge you nothing, on any loan type including commercial, with no arrangement fee and no clawback recovery fee.
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These reviews reflect other clients’ experiences. They are not a promise of any particular outcome for your business, which will always depend on your circumstances and the lender’s assessment.
Frequently Asked
ATO debt and business finance FAQs
General information about how this works. Not tax advice about your position.
Can I get a business loan with an ATO tax debt?
Often yes. Commercial lenders see tax debt regularly and it is not an automatic decline. What matters more is whether the debt is disclosed upfront, whether a payment plan is in place and being met, and whether your lodgements are current. Lender appetite varies considerably, so which lender the application goes to matters more here than on almost any other type of file.
Does an ATO payment plan hurt my finance application?
Generally it helps. A documented plan gives a lender a balance, a repayment and an end date, which is a liability they can model, rather than an unquantified risk. It does reduce serviceability, because the repayment is a real commitment, so the amount you can borrow will be lower than with no debt at all. A plan with missed payments is the version that damages an application.
Will the ATO put my tax debt on my credit file?
Only where every element of a defined test is met. The ATO states it may report where you have an ABN and are not an excluded entity, you have one or more tax debts with at least $100,000 overdue by more than 90 days, you are not engaging with the ATO, and you have no active Tax Ombudsman complaint about the intent to report. It also states it will send a written notice before disclosing.
Does a payment plan stop the ATO reporting my debt?
The ATO states it will not report your debt information where you are already engaging with it to manage your tax debts, even where the debt is $100,000 or more. A payment plan being complied with is the most common form of engagement. If a plan lapses, the protection lapses with it, so contact the ATO before missing a payment rather than after.
Is the $100,000 threshold per debt or in total?
The ATO’s criteria refer to one or more tax debts totalling at least $100,000 overdue by more than 90 days. It is an aggregate position across accounts rather than a single liability, which catches businesses that think in terms of separate activity statement and income tax balances. Two amounts that each look survivable can cross the line together.
Is ATO interest still tax deductible?
No. General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible, and that applies regardless of which income year the underlying debt relates to. The effect is that the real cost of carrying a balance rose without the headline rate changing. Whether refinancing now makes sense is a calculation for your accountant using your actual figures.
Can a lender refinance my ATO debt directly?
Some will and some will not, and this varies more between lenders than almost anything else in commercial credit. Some fund an ATO payout as a refinance of an existing liability, some lend for working capital but will not knowingly fund a tax liability, and some require the debt cleared before settlement. Knowing which is which before applying avoids an avoidable decline.
What should I fix first if I want finance?
Lodgements. Outstanding returns and activity statements generally have to be lodged before the ATO will agree to a payment plan, and lenders read unlodged returns as an inability to know your own position. Getting current is frequently more valuable to an application than reducing the balance, and it is usually faster.
Does Best Interests Duty apply to a business loan?
No. Best Interests Duty applies to regulated consumer credit under the National Consumer Credit Protection Act, meaning home loans, personal loans and residential investment lending. Business and commercial lending sits outside that regime, so the protections you have on a home loan do not travel across. Intellect Finance charges you nothing on any loan type including commercial, with no clawback fee.
The honest bottom line
Most business owners with a tax debt believe they are further into trouble than they are. The reporting regime does not trigger on owing money. It triggers on owing six figures, for more than a quarter, while not engaging, after a written warning. Engage at any point before that and the debt stays off your credit file, and a lender treats it as a liability to be modelled rather than a default to be priced.
What has genuinely changed is the cost of doing nothing. With ATO interest no longer deductible since July 2025, the arithmetic that made it rational to pay the ATO slowly has shifted, and that comparison is worth redoing with your accountant using current numbers rather than assuming the old answer holds. Get the lodgements current, get engaged, get it documented, and then have the finance conversation. In that order it is a manageable problem. In the reverse order it is usually a decline.
Joseph Sukkar
Joe founded Intellect Finance in Penrith in 2005 and has more than 25 years in Australian finance. Commercial lending is a core part of the practice rather than a sideline, and files carrying an ATO balance are common enough to be routine. The firm works alongside clients’ accountants rather than in place of them, and charges clients no fee on any loan type. More about the team.
Sources
Australian Taxation Office, Disclosure of business tax debts, for the reporting criteria, the written notice, and the position that debts will not be reported where the business is engaging. ato.gov.au
Australian Taxation Office, guidance on denying deductions for ATO interest charges, for the non-deductibility of general interest charge and shortfall interest charge incurred on or after 1 July 2025. ato.gov.au
Australian Taxation Office, media release on notices of intent to disclose business tax debts, on the return to business-as-usual debt collection. ato.gov.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal or tax advice. It does not take your circumstances into account. Before acting on any information here, consider whether it is appropriate to your situation and obtain your own advice.
This is not tax advice, and the distinction matters here more than usual. Whether to enter a payment plan, seek remission of interest, lodge an objection, apply for release from a tax debt, or take any other step in relation to the ATO is a matter for your accountant or registered tax agent. Intellect Finance is a credit licensee and is not a registered tax agent. Nothing on this page is a recommendation about how to deal with a tax liability.
Director penalty notices and personal liability are legal matters. Where PAYG withholding, GST or superannuation guarantee amounts are involved, directors may become personally liable, and the options available depend on strict timeframes and on whether amounts were reported on time. If you have received a notice, obtain legal and accounting advice immediately. This page does not describe those rules and is not a substitute for that advice.
About the ATO rules described. Statements about the disclosure of business tax debts, the reporting criteria, the written notice process, what constitutes engagement, and the deductibility of interest charges are general summaries of published ATO guidance, checked on 2 September 2026. They are simplified for readability, are not a complete statement of the law, and do not address every requirement or exception. ATO administrative practice, thresholds and guidance change. Confirm the current position with the ATO or your accountant before acting.
Interest rates. The general interest charge is set by the ATO on a quarterly basis and compounds daily. This article does not quote a rate. Check the current rate on the ATO website.
Lender policy varies and changes. Appetite for files carrying a tax debt, willingness to fund an ATO payout, evidence requirements, pricing, security requirements and approval timeframes are set by individual lenders, differ substantially between them, and change without notice. Descriptions of common practice here are general observations rather than any particular lender’s policy. No broker can guarantee finance approval, pricing or a timeframe.
Refinancing changes your risk position. Moving an unsecured tax liability into a facility secured over business or personal property is a change in risk, not only a change in cost. Consider it with your accountant and, where property is involved, your solicitor.
Best Interests Duty. Business and commercial lending for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty does not apply to it.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a facility is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing before any work begins.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. Article checked 2 September 2026.
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Tell us where the debt actually sits.
The balance, whether a plan is in place, and where your lodgements sit. That is enough for us to tell you whether finance is available now, which lenders will look at a file like yours, whether refinancing the debt makes sense, or whether three months of preparation would change the answer materially. We will give you the unwelcome version if that is the accurate one. Penrith based since 2005, clients Australia-wide. No fee on any loan type. ACL 390611.
General information only, not tax, legal or financial advice. Speak with your accountant or registered tax agent about any tax liability. Business lending is not regulated consumer credit. No broker can guarantee approval.
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