Tax Debt Loans: Can You Get a Loan to Pay an ATO Debt?
Business Owners Hub
tax debt loans, ATO payment plans, refinancing, caveat loans, second mortgages
Owing the ATO is common, and so is borrowing to clear it. This guide covers every route, from a payment plan to refinancing your home, what lenders check when you owe tax, when borrowing is the wrong answer, and what has to change after the debt is cleared.
Quick Answer
Often, yes. A business can use a business loan, a caveat loan or a second mortgage to pay the ATO, and a home owner can sometimes refinance to clear a tax debt. Lenders ask why the debt exists and whether it is being managed, not just the balance.
Also called: ATO debt loan, tax debt refinance, ATO tax debt finance, tax debt consolidation. Tax debt refinance usually means rolling the ATO debt into a new or larger property loan; the other names cover any loan used to pay the ATO.
Can you get a loan to pay an ATO tax debt?
Yes, in many cases you can get a loan to pay an ATO tax debt. Business owners borrow through a business loan, a caveat loan or a second mortgage, and home owners can sometimes refinance. The real questions are which route fits, what it costs against staying on a payment plan, and whether a lender will accept the reason the debt exists.
Owing the ATO is rarely a sign of a bad business. A strong year leaves a tax bill nobody set cash aside for, a large customer pays late, or activity statements slip while the owner keeps the doors open. The problem is what the debt does next: it sits with a creditor that charges compounding interest and holds collection powers no ordinary lender has. Replacing it with a loan can make sense, but only when the loan is cheaper, safer or more predictable than the debt it clears.
The first distinction is between managing an ATO debt and replacing it. A payment plan leaves the liability with the ATO and pays it down over time. A loan pays the ATO out and replaces that liability with a debt to a lender.
The 4 pathways this guide covers:
- Business finance. An unsecured or secured business loan pays the ATO and the business repays the lender.
- Property-backed short-term finance. A second mortgage, a private first mortgage or a caveat loan, when speed or a difficult file rules the bank out.
- A home loan refinance. An individual or self-employed home owner refinances or tops up a home loan, where the purpose of the loan and lender policy allow it.
- No new loan. An ATO payment plan, interest remission, release for an eligible individual, or restructuring and insolvency advice, which this guide treats as the baseline every loan is compared against.
Changing creditor does not fix the cause of the debt. If the business is still under-pricing, drawing too much cash, not setting aside GST and PAYG withholding, or lodging late, a refinance can turn one tax debt into 2 problems: a secured loan and a new ATO balance.
If the property-backed routes are new to you, start with what a second mortgage is and how a caveat loan differs from it: a second mortgage is registered behind your existing lender, while a caveat loan is a short-term loan where the lender lodges a caveat on the title to protect its interest. Personal loans and car loans used to pay tax are not covered here. Credit cards drop out as a way to pay altogether: the ATO stops accepting them after 30 November 2026 (ATO, media release, last updated 1 October 2026, read 7 October 2026).
One idea runs through this guide. The reason the debt exists matters more to a lender than its size, which is why how lenders read an ATO debt sits at the centre of it. If your payment plan has already defaulted, the ATO's next steps are closer than you think, so check what the ATO can do next before you compare loan costs.
What are your options for clearing an ATO debt?
There are 6 routes for clearing an ATO debt: a payment plan, an unsecured or secured business loan, a home refinance, a second mortgage, and a caveat or private loan. The right one depends on whether the debt is a business or personal liability, what security you have, how fast it needs to be gone and what it will cost.
Every route clears the debt and each one fails in its own way, so weigh the main risk before anything else.
| Route | Who it suits | What secures it | What gets checked | Main risk |
|---|---|---|---|---|
| ATO payment plan | Anyone who can meet instalments and keep lodging on time | Nothing | Lodgement history, plan history, the proposed instalments | Interest keeps compounding and is not deductible; a missed instalment, a missed lodgement or a new unpaid debt can default the plan |
| Unsecured business loan | Trading businesses with steady cash flow and a smaller debt | Nothing, sometimes a director's guarantee | Bank statements, turnover, existing commitments, the ATO statement | Shorter terms and higher cost than secured lending; some lenders decline on an ATO debt alone |
| Secured business loan | Businesses with property, equipment or other security | Business or investment property, or other assets | Security value, serviceability, lodgements, the cause of the debt | Puts the security at risk; slower if a valuation is needed |
| Home loan refinance (consumer) | Home owners with equity and provable income | The home | Responsible lending assessment, income evidence, the payout figure | Turns a short-term tax debt into long-term secured debt; declined if the lender cannot verify income |
| Second mortgage | Property owners whose first lender will not increase the loan | The property, behind the first mortgage | Equity, the first mortgagee's consent, the exit | Higher cost; the first mortgagee can refuse consent |
| Caveat or private loan | Owners who need the ATO paid within days and have a clear exit | A caveat or mortgage over property | Equity, the exit, the title | The most expensive route; without an exit the debt moves rather than ends |
Sources: Payment plan limits: ATO, Setting up a payment plan, last updated 1 October 2026, read 7 October 2026. Interest on plans: ATO, Payment plans, last updated 24 February 2026, read 7 October 2026. Other rows: Switchboard desk observations, October 2026, indicative, not any lender's policy.
On the ATO side, if you owe $200,000 or less you may be able to set up a plan through the ATO's online services, where the ATO's tool gives you an upfront amount to pay and suggested instalments. A larger debt, a repayment timeframe beyond 2 years, or 2 or more plans defaulted or cancelled in the past 12 months sends you to the ATO's lodge and pay enquiry line, where you will be asked about your income, expenses and assets. Before you ring, use the ATO payment plan calculator to test what instalments the business can actually carry.
A caveat or private loan is private lending territory: priced for speed and flexibility, and only sensible with a clear exit. If the tax debt sits alongside other facilities, consolidating other business debts is covered in its own guide; this page stays on the tax debt itself.
Can you refinance an ATO debt if you are already on a payment plan?
Yes, being on an ATO payment plan does not prevent a refinance. A lender may read a current, well-kept plan more favourably than an unmanaged tax debt, because it shows you are engaging with the ATO.
There are 3 different files inside "I am already on a payment plan":
- The plan is current and affordable. Finance may still be worth considering if replacing the ATO debt gives a better overall structure.
- The plan is current but choking working capital. A refinance may ease the monthly cash flow, but only if the total cost and the security risk make sense.
- The plan has defaulted or is about to. The file becomes urgent, lender choice can narrow, and the ATO may move to firmer action, so check the ATO's next step first.
Can you refinance your home to pay off a tax debt?
Yes, some lenders will refinance or top up a home loan, or add a second mortgage on the home, to pay out an ATO debt. Whether consumer credit rules apply depends on what the loan is for, not on the home being the security.
The National Credit Code applies where credit is provided to a person wholly or predominantly for personal, domestic or household purposes, or for residential investment property (ASIC, National Credit Code, last updated 1 August 2025, read 7 October 2026). It is a purpose test, so a business-purpose loan does not become consumer credit only because the family home secures it.
Lenders that agree will almost always pay the ATO directly at settlement. It removes the ATO as a creditor on the day the loan funds, and it proves the loan purpose: the money did what the application said it would. Expect the lender to ask for a current payout figure from the ATO before settlement is booked.
What if the tax debt is personal?
A refinance used mainly to pay your own personal tax liability may be regulated consumer credit. Where it is, the lender must follow responsible lending rules.
Responsible lending is the part most borrowers underestimate. The lender must make reasonable inquiries about your requirements and financial situation, take reasonable steps to verify what you tell it, and assess that the loan is not unsuitable for you. Responsible lending explains the test in plain terms, and ASIC's responsible lending guidance, including Regulatory Guide 209, sets out the obligations under the National Consumer Credit Protection Act 2009 (ASIC, read 7 October 2026). A tax debt does not fail that test on its own. Income the lender cannot verify usually does.
What if the ATO debt belongs to a business?
A loan used mainly for business purposes, such as paying a company's tax debt, can sit outside the National Credit Code even where a home is the security. The lender still runs its own credit assessment, but the house being security does not by itself decide whether the loan is consumer credit.
What if you are self-employed and your returns are behind?
Some non-bank lenders will assess a refinance on alternative income evidence, such as activity statements or an accountant's letter, when your returns are behind. They still want the overdue returns lodged, or a dated plan to lodge them, because the ATO debt cannot be confirmed until it is assessed.
For self-employed borrowers, the sticking point is usually income evidence rather than the debt itself. Some non-bank lenders assess on alternative evidence, which is where a one doc home loan or an alt doc refinance comes in; the document detail for self-employed home loans lives in its own guide. Where the first lender will not increase the loan at all, a second mortgage on the home is the alternative, assessed with the same care.
Lodge first, even if you cannot pay. Until a return is assessed, neither you nor the lender knows the real size of the debt, and a refinance sized on a guess tends to fall over at the payout stage.
Can you consolidate an ATO debt into another loan?
Yes, tax debt consolidation means one new loan pays out the ATO, and sometimes other debts, in a single settlement. A home owner does it by refinancing to a larger home loan; a business does it with a secured business loan or a private loan over property.
Consolidating into the mortgage can lower the monthly outgoing, but it turns a short-term tax debt into a long-term secured one, so weigh the total interest over the loan's life, not just the repayment. Moneysmart makes the same point about any debt consolidation and refinancing: a lower rate over a longer term can cost more in interest and fees, and a home put up as security is at risk if the new loan is not repaid (Moneysmart, last updated 31 August 2026, read 7 October 2026).
The mechanics of rolling several debts into one property loan are covered in consolidating debt into a property loan, and a business with several facilities should read business debt consolidation. The tax-specific points are narrower: the lender will want the ATO debt paid out in full at settlement rather than reduced, every return and activity statement lodged so the payout figure is final, and a clear answer to whether the debt will come back next year.
Can a business get a loan to pay tax debt?
Yes, and business-purpose loans are the most common way an ATO debt gets refinanced. The lender pays the ATO directly and the business repays the lender over an agreed term. Because the loan is for business purposes, it is assessed on the business's cash flow and security rather than under consumer responsible lending rules.
The 3 business routes:
- Unsecured business loan. Fast, with shorter terms and a higher cost than secured lending, and usually a director's guarantee.
- Secured business loan. Property or equipment as security, a lower cost, slower to settle, and the lender may want a valuation.
- Caveat or private loan over business or investment property. For a deadline the first 2 cannot meet; caveat loans for business and how fast each option settles cover the trade-off.
Whichever route you use, the lender will usually pay the ATO directly from the payout figure on your statement of account rather than hand the funds to the business. In practice, what lenders actually look at first on a business file is the bank statements and that statement of account side by side: one shows whether the business can carry a repayment, the other shows whether the debt is shrinking, stuck or growing.
Two distinctions change how a business file reads. A paid tax default is not the same as a current ATO debt: one is history to explain, the other is a live creditor to clear. And a business whose returns are behind is not shut out, because low doc lending against activity statements exists, usually at a higher cost than full doc lending.
If a private loan is on the table, read how private lending works before you sign anything, because the exit is a condition of the loan, not an afterthought.
How does a second mortgage differ from a caveat loan?
A second mortgage is a registered mortgage that sits behind the first mortgagee, while a caveat is a notice on the title that protects a claimed interest in land. With a caveat loan, the loan and security documents create the lender's rights, not the caveat by itself.
Both are short-term compared with an ordinary home loan, and both should be judged on the exit as much as the entry: what repays the facility, on what date, and what happens if that event is delayed.
How do lenders assess you when you owe the ATO?
Lenders are less interested in the size of your ATO debt than in why it exists and whether it is being managed. A debt from one bad year with everything lodged and a plan in place reads very differently from a growing balance with unlodged returns and a defaulted plan.
On the files we see, the same debt can be approved or declined depending on the story around it.
| What the lender looks at | A file lenders can work with | A file that gets declined |
|---|---|---|
| Lodgements | Returns and activity statements lodged | Unlodged returns or activity statements |
| Evidence of the debt | A current ATO statement of account | No explanation for the debt |
| Cause of the debt | A one-off cause, such as a bad debtor, a tax bill after a strong year or a lumpy contract | Using the ATO as a bank year after year |
| Payment plan history | A payment plan honoured, or a clear reason it slipped | A second payment plan default |
| Credit file | No ATO report on the credit file | A business tax debt already reported to a credit bureau |
| Current trading | Bank statements show the business can carry the proposed repayment | The new loan repayment is no more affordable than the tax payment was |
| ATO action | Engaging with the ATO before firmer action begins | A director penalty notice left unanswered |
| Security and exit | Equity or security and a realistic exit | A plan to refinance later, with no evidence the later refinance will work |
Source: Switchboard broker-desk observations, October 2026, indicative, not any lender's policy.
The credit file test is specific. The ATO may report a business tax debt to credit reporting bureaus where the business has an ABN and is not an excluded entity, at least $100,000 is overdue by more than 90 days, the business is not engaging with the ATO to manage the debt, and there is no active Tax Ombudsman complaint about the intent to report. Before it reports, the ATO sends an intent to disclose notice, and you have 28 days from receiving it to act. The debt comes off the credit report once you pay it in full or start engaging with the ATO to manage it (ATO, Disclosure of business tax debts, last updated 15 October 2025, read 7 October 2026).
Engaging is the word that matters. The ATO's own list starts with a payment plan you are complying with, and also covers applying for release, an active objection, an active review or appeal, and an active Tax Ombudsman complaint about the debt (ATO, Disclosure of business tax debts, last updated 15 October 2025). From the lender's side, engagement reads more simply: a payment plan you are keeping to, or a lodgement plan the ATO has accepted.
Lender types weight the file differently. Private lenders weight equity and the exit over lodgements; banks and non-bank lenders weight lodgements and serviceability, which is why an alt doc home loan can work for a self-employed borrower whose income is real but whose paperwork is behind. On our lender panel between May and September 2026, caveat, second mortgage and private first mortgage lenders all accepted paying out an ATO debt as a loan purpose, and business lenders reviewed the ATO portal and considered existing ATO arrangements rather than excluding them (Switchboard Finance, what non-bank lenders accepted, as at September 2026, read 7 October 2026).
What documents does a lender need for a tax debt loan?
Most lenders ask for the same 6 things on a tax debt loan.
- An ATO statement of account and payout figure
- Lodged returns and activity statements, or a dated lodgement plan
- Bank statements
- Evidence of what caused the debt
- For short-term loans, the exit: a contract of sale, a refinance approval in principle or a dated plan
- For property-backed loans, the title and, usually, a valuation
The explanation that helps most is short and specific: what caused the debt, what has changed so it does not recur, what is lodged and what is still outstanding, what the ATO is doing now, and what repays the proposed loan.
For the full document list, use the ATO debt evidence pack. If the debt has already been reported, how a reported tax debt reads to lenders explains what changes and how to answer it.
How much interest does the ATO charge on a tax debt?
The ATO charges general interest charge (GIC) of 11.51 per cent a year on an overdue tax debt for October to December 2026, compounding daily. That is a daily rate of 0.03153425 per cent (ATO, General interest charge rates, last updated 4 September 2026, read 7 October 2026).
The rate is reset every quarter. Under section 8AAD of the Taxation Administration Act 1953, "What is the general interest charge rate?", it is the monthly average yield of 90-day bank accepted bills plus 7 percentage points, so check the current figure before you compare (ATO legal database, section 8AAD, read 7 October 2026).
GIC is also no longer tax deductible. GIC and shortfall interest charge incurred on or after 1 July 2025 cannot be claimed as a deduction, even where the debt relates to an earlier income year (ATO, Denying deductions for ATO interest charges, last updated 8 June 2026, read 7 October 2026).
Paying the debt in full stops GIC from accruing on it. A loan used to pay the ATO replaces GIC with the lender's interest, so the choice comes down to one rate against the other after fees and tax.
Does an ATO payment plan stop GIC?
No, an ordinary ATO payment plan does not stop GIC. Tax debts on a payment plan keep accruing GIC, compounding daily (ATO, Payment plans, last updated 24 February 2026, read 7 October 2026), so stretching a plan makes each instalment easier and the total interest higher. The exception is the interest-free plan for small business activity statement debt.
Is a loan cheaper than staying on an ATO payment plan?
A secured loan can cost a business less than an ATO payment plan, but a short-term caveat or private loan usually costs more. The comparison changed on 1 July 2025: GIC compounds daily and is no longer deductible, while interest on a loan a business takes to pay its tax may be. Short-term money only makes sense when a plan is not available or enforcement is close.
The tax treatment is where the comparison turns. The ATO's fact sheet says a taxpayer carrying on a business may be able to deduct interest on money borrowed to pay a tax debt, but only if that interest is necessarily incurred in carrying on the business. An individual who is not carrying on a business cannot, and neither can an individual partner in a partnership (ATO, Denying deductions for ATO interest fact sheet, August 2025, read 7 October 2026). Ask your registered tax agent which side of that line your loan falls on before you rely on a deduction.
| Cost driver | ATO payment plan | Secured business loan or home refinance | Caveat or private loan |
|---|---|---|---|
| Interest basis | General interest charge, reset each quarter, compounding daily | A lender rate, usually fixed or variable over the term | A monthly rate for a short term, often with interest prepaid |
| Tax treatment of the interest | Not deductible if incurred on or after 1 July 2025 | May be deductible for a taxpayer carrying on a business, not for an individual outside business; ask your tax agent | Same test as the secured loan; ask your tax agent |
| Establishment and other fees | None | Application, valuation and settlement costs | Establishment, legal and exit fees are the main cost |
| Term and flexibility | Online if you owe $200,000 or less; by phone if you need longer than 2 years | Years; early repayment terms vary | Months; an exit is a condition of the loan |
| If you miss a payment | The plan can default and the whole overdue balance becomes immediately payable | Arrears, default interest and, eventually, enforcement against the security | Default interest and enforcement against the security, quickly |
Sources: ATO, General interest charge (how the ATO calculates GIC), last updated 10 June 2026; ATO, Setting up a payment plan, last updated 1 October 2026; ATO, Managing your payment plan, last updated 1 October 2026; ATO, Denying deductions for ATO interest fact sheet, August 2025. All read 7 October 2026. Loan columns: Switchboard desk observations, October 2026, indicative, not any lender's pricing.
Where this commonly lands: a secured loan or refinance can beat the plan for a business whose loan interest is deductible, a caveat or private loan rarely beats it on price, and short-term money earns its cost only when time, not price, is the problem. Loan pricing is set by lenders, not the ATO, and it moves with the market: the Reserve Bank raised the cash rate target by 25 basis points to 4.60 per cent on 29 September 2026 (RBA, media release 2026-27, read 7 October 2026), so any quote you compare against the GIC should be a current one.
For a worked comparison, see the GIC against a working capital loan; this page does not repeat its maths. Model your own instalments before you speak to the ATO, and if the ATO is one of several creditors, which debt to clear first matters as much as the price.
Who can get an interest-free ATO payment plan?
A small business with a recent activity statement debt of $50,000 or less may qualify for an interest-free ATO payment plan over 12 months. The ATO's criteria are:
- an annual turnover of less than $2 million
- activity statement amounts of $50,000 or less that have been overdue for up to 12 months
- a good payment and lodgement history, with no more than 1 payment plan default in the last 12 months
- no outstanding activity statement lodgements
- being unable to obtain finance, such as a loan, through normal business channels
- being able to show the business is viable
- repaying within 12 months by direct debit
GIC is still charged during the plan and is remitted as it appears on the account while you keep paying (ATO, Alternative payment plans, last updated 3 September 2026, read 7 October 2026). The finance test matters for anyone weighing a loan: a business that can get a loan through normal channels would not meet that criterion, so the interest-free plan and a tax debt loan are usually alternatives, not a pair.
What can the ATO do if a tax debt is not paid?
An unpaid tax debt lets the ATO garnishee your bank or customers, make directors personally liable, report the debt to credit bureaus and apply to wind up a company. The step it has reached sets your timetable: a missed instalment leaves room to negotiate, a garnishee notice or director penalty notice means money is about to move, and a statutory demand or winding-up application puts the company's survival, not just the debt, on the clock.
Each step has its own guide with the detail that applies to it.
| Step | What it means | Time you have | Read the full guide |
|---|---|---|---|
| Defaulted payment plan | Your plan has defaulted and the ATO may take firmer action | None: the whole overdue balance is immediately payable | Defaulted payment plan guide |
| Director penalty notice | The ATO can recover the company's unpaid PAYG withholding, GST or super guarantee charge from the directors personally | 21 days from the day the ATO posts the notice | Director penalty notice guide |
| Garnishee notice | The ATO directs your bank, your customers or the buyer of a property you are selling to pay it directly | No set period: the ATO sends a warning letter first | Garnishee notice guide |
| Intent to disclose notice | The ATO intends to report the business tax debt to credit reporting bureaus | 28 days from receiving the notice | Intent to disclose guide |
| Statutory demand | A formal demand on the company to pay the whole debt or enter a payment plan. If it is not met, the ATO can apply to wind the company up | 21 days after the demand is served | Statutory demand guide |
| Winding-up application | The ATO has asked a court to liquidate the company | Until the court hearing date on the application | Winding-up application guide |
| Unpaid GST blocking settlement | An ATO debt is stopping a property sale from settling | Until the settlement date in the contract | Unpaid GST at settlement guide |
Sources: ATO, Managing your payment plan, last updated 1 October 2026; ATO, Director penalties, last updated 16 April 2026; ATO, Garnishee notice, firmer action, last updated 5 January 2026; ATO, Disclosure of business tax debts, last updated 15 October 2025; ATO, Legal action we may take, last updated 5 January 2026; Federal Court of Australia, Corporations Information Sheet 1, on section 459G of the Corporations Act 2001. All read 7 October 2026. Winding-up and settlement timing: Switchboard broker-desk observations.
A director penalty notice gives 21 days, and the clock starts on the day the ATO posts the notice or leaves it at the address registered with ASIC, not the day you open it. In that time the penalty is remitted if the company pays in full, an administrator or small business restructuring practitioner is appointed, or the company begins to be wound up. Where PAYG withholding or GST was reported more than 3 months after its due date, or super guarantee charge after its due date, only payment in full remits the penalty (ATO, Director penalties, last updated 16 April 2026).
Finance can sometimes pay a liability inside one of these deadlines, but it does not make the legal process go away. Once a director penalty notice, statutory demand or winding-up application is on foot, get legal or insolvency advice alongside any finance work.
The ATO's own list of firmer action covers garnishee notices, director penalty notices and disclosure of business tax debts to credit reporting bureaus, with other actions including directions to pay super guarantee charge, departure prohibition orders, freezing orders and securities (ATO, Firmer action we may take, last updated 17 September 2026, read 7 October 2026).
A payment plan does not stop every notice. If you are relying on one, read does a payment plan stop a director penalty notice before you assume the clock has paused.
Should you borrow to pay the ATO?
You should not borrow to pay the ATO when the business cannot service the new loan any better than it serviced the tax. Borrowing is also the wrong answer when the ATO's own options would clear the debt more cheaply, or when the debt is a symptom of a business that needs restructuring rather than refinancing.
A broker should say this plainly: some tax debts should not be refinanced. If the business could not pay the tax, it may not be able to pay a lender either, and a lender's remedy is against your property, not just your account.
When is borrowing the wrong answer?
Borrowing is the wrong answer in 6 situations.
- The business cannot service the proposed loan from normal trading cash flow.
- The loan depends on a later refinance the borrower is unlikely to qualify for.
- An affordable ATO option is materially cheaper and no enforcement deadline forces another solution.
- The tax debt is one part of a broader insolvency problem.
- The business is still creating new GST, PAYG withholding or income tax arrears while refinancing the old ones.
- The private loan needs a property to be sold, and the owner is unwilling or unable to sell it.
What should you try before you borrow?
Work through the ATO's own options and free help before you take on a loan.
- A payment plan. If you owe $200,000 or less you may be able to set one up online (ATO, Setting up a payment plan, last updated 1 October 2026), and a small business may meet the interest-free plan criteria. Test the instalments before you commit to a figure.
- Another plan after a default. If you have defaulted on or cancelled 2 or more plans in the past 12 months, the ATO sends you to its phone line rather than online services, so the proposal has to be stronger; another plan after a default covers how to build one.
- GIC remission. The ATO can remit all or part of the interest. It weighs what caused the delay, whether that was within or outside your control, the steps you took to reduce the effect, whether remission is fair and reasonable, and your compliance and payment history (ATO, Remission of interest charges, last updated 22 January 2026, read 7 October 2026).
- Release from the debt. Available only to individuals and trustees of deceased estates, where paying would leave them in financial hardship. Companies, trusts and partnerships cannot apply, and GST, PAYG withholding, super guarantee charge and director penalty notice amounts cannot be released (ATO, Tax support for individuals, businesses, not-for-profits and tax professionals, last updated 18 May 2026, read 7 October 2026).
- A compromise. In limited cases the ATO will accept a lesser amount to settle an undisputed tax debt. The offer cannot be for less than your total net assets, and hardship alone is not a reason (ATO, Compromise of tax debt, last updated 16 December 2022, read 7 October 2026).
- Free, independent help. The National Debt Helpline and Moneysmart's debt guidance help individuals and sole traders work through a tax debt alongside everything else they owe.
- A complaint, if the ATO has handled your debt unfairly. The Tax Ombudsman is free and independent of the ATO.
- Insolvency advice, when the business is not viable. That is a job for a registered liquidator or restructuring practitioner, not a lender, and it is worth taking well before you need to read about when a winding-up application is filed.
How quickly can you get a loan to pay the ATO?
On our lender panel, caveat, second mortgage and business loans settled in 24 hours to about 10 days between May and September 2026, while a home refinance usually takes weeks. In our experience the order of speed among the property-backed routes is caveat loan, then private second mortgage, then secured business loan, then a home refinance, which is why the ATO step you have reached usually decides which loan you can realistically use.
| Route | Observed time to settle | What the lender decides on | What slows it |
|---|---|---|---|
| Unsecured business loan | Funding possible within 24 hours of a decision where bank data is linked | Bank statements, turnover and existing commitments | Some lenders decline on an ATO debt alone |
| Caveat loan | 24 to 48 hours without a valuation, up to 7 business days with one | Equity and the exit | A valuation, an unclear title, or no documented exit |
| Second mortgage | 3 to 7 business days, longer where the first mortgagee's consent is required | Equity, the exit and the first mortgagee's consent | The first mortgagee refusing or delaying consent |
| Private first mortgage | 3 to 10 business days where a valuation is required | Equity, the exit and the valuation | The valuation, or no documented exit |
| Secured business loan | 3 to 10 days | Security value, serviceability and lodgements | A valuation, or unlodged returns |
| Home loan refinance | Weeks rather than days; not in the observed data | The full responsible lending assessment and verified income | Income the lender cannot verify, or an ATO payout figure that is not final |
Source: Switchboard Finance, non-bank lender policy matrix, lender-panel evidence observed May to September 2026, published 20 September 2026, read 7 October 2026. Ranges are observed, not offered, and are not any lender's service standard. The home loan refinance row is a Switchboard broker-desk observation, October 2026.
A garnishee notice is the sharpest example. It directs your bank or customers to pay the ATO directly, so money can leave before a refinance is ready, and responding to a garnishee notice fast is a different problem from refinancing a debt on a plan that is still running.
The fastest route is not automatically the right one. A borrower with weeks in hand should not pay private lending prices because a facility can settle tomorrow, and a borrower with a live garnishee notice may not have time for a home refinance.
From the broker's desk, indicative only
Based on Switchboard broker files on ATO debt refinances, business and consumer, in 2026. As of October 2026.
- What usually decides speed is not the lender but the file: a clean title, a current ATO statement of account and lodgements up to date move fast; a missing return stops everything.
- What most often gets a tax debt file declined is unlodged returns or activity statements, a second payment plan default, or short-term money with no exit.
- What helps most is a written plan for the exit before any caveat or second mortgage is drawn, and a one-page explanation of why the debt arose and why it will not recur.
Observations from files we have worked on, not a quote, not an offer and not an indication of approval. Outcomes depend on the lender, the security, your lodgements and your circumstances, and change often.
If you are weighing short-term money, read when a caveat loan fits an ATO debt alongside how caveat loans work; for a second mortgage, how second mortgages work sets out the consent and priority points, and private lending options sit across both. Once the ATO is paid and the file is clean, refinancing after the tax debt is cleared is usually the exit from short-term money.
How is the ATO paid when the loan settles?
The lender's solicitor or settlement agent pays the ATO directly from the loan funds, using a current payout figure and your payment reference number. The money does not usually pass through your account.
- Get the numbers. Get a current statement of account and a payout figure from the ATO, with the payment reference number.
- Lodge everything. Confirm every overdue return and activity statement is lodged, so the figure is final.
- Instruct the payout. The lender's solicitor or settlement agent is instructed to pay the ATO directly from the loan funds.
- Close the plan. The ATO receipts the payment; if a payment plan was in place, confirm it is closed and cancel any remaining direct debits.
- Keep the paper trail. Keep the receipt and the lender's disbursement statement for your tax agent.
The settlement detail for a second mortgage is in paying out the ATO at settlement.
What should you do after the ATO is paid?
After the ATO is paid, set up a system that stops the next BAS, PAYG withholding or income tax bill becoming the next refinance. Clearing the old debt is only half the job.
A practical plan after settlement usually covers 5 things:
- Separate the tax cash. Move GST, PAYG withholding and expected income tax into a separate account as revenue is received.
- Bring lodgements fully up to date. A cleared ATO balance is far more useful to future lenders when the reporting position is clean too.
- Rebuild working capital. If the business used tax money to fund stock, wages or growth, solve that working capital gap directly instead of using the ATO again.
- Set an exit date for short-term finance. If a caveat or private loan was used, start the refinance or sale process well before the facility matures.
- Review pricing and drawings. A recurring tax debt can mean margins, director drawings or cash reserves do not match the tax the business generates.
Does clearing the ATO debt fix your borrowing position straight away?
No, clearing the ATO debt does not fix your borrowing position straight away. Paying the debt removes the live ATO liability, but a lender can still weigh the history behind it: recent credit events, payment plan defaults, lodgement history, business performance and any short-term loan that now needs refinancing.
That is why the cleanest exit from a caveat or private loan is prepared before the short-term facility settles. Once the ATO is paid and the file has settled down, a lower-cost refinance may open up, but it should never be assumed. If the intended exit is a home loan, read refinancing after an ATO debt has been cleared.
Borrowing to pay the ATO is common and often sensible, but it is a trade, not a rescue. A payment plan is the baseline: simple to set up, but its interest compounds daily and is no longer deductible. Secured business loans and home refinances usually cost less over time but settle more slowly and put security on the line. Caveat and private loans buy speed at a price and only work with an exit. For some files the honest answer is not a loan at all, but remission, release or advice.
Key takeaway: a tax debt loan replaces a compounding, non-deductible ATO debt with a loan you can plan around, but only when the cause of the debt has been fixed and the loan is cheaper, faster or safer than the ATO's own options.Questions about tax debt loans
Rarely, and only in narrow cases. The ATO can release an individual from certain tax debts where paying would leave them in financial hardship, but companies, trusts and partnerships cannot apply, and GST, PAYG withholding, super guarantee charge and director penalty notice amounts cannot be released. The ATO can also remit general interest charge where the delay was caused by events outside your control. For most business owners the realistic options are a payment plan or finance.
Not on request. The ATO may release an eligible individual from a tax debt in financial hardship, and it can place a debt on hold if collecting it is not cost-effective, but an on-hold debt remains due and payable, refunds and credits are offset against it, and it can be taken off hold if your circumstances change. A company cannot apply for release: its debt is paid, put on a plan, placed on hold by the ATO, or enforced through steps such as a statutory demand.
Interest keeps compounding daily and the ATO moves up its enforcement ladder. The first step is usually a payment plan. If the debt is not managed, firmer action can include a garnishee notice to your bank or customers, a director penalty notice for company debts, and reporting a business tax debt to credit reporting bureaus. Later steps include statutory demands and winding-up applications.
Until the due date on your notice, then as long as an agreed payment plan allows. If you owe $200,000 or less you may be able to set a plan up online; a larger debt, or a plan longer than 2 years, is arranged with the ATO by phone and needs a proposal it accepts. Interest accrues for the whole term, so a shorter plan costs less. Test the instalments with a payment plan calculator before you ring.
The ATO's general interest charge and shortfall interest charge incurred on or after 1 July 2025 are not deductible, even where the debt relates to an earlier year. Interest on a loan taken out to pay a tax debt may be deductible for a taxpayer carrying on a business, where it is necessarily incurred in carrying on that business, but not for an individual outside business or an individual partner. Ask your registered tax agent before you rely on a deduction.
Yes, on the amount paid. General interest charge accrues daily on the overdue balance, so once the ATO is paid in full at settlement no further GIC accrues, and GIC already charged forms part of the payout figure. The loan then carries its own interest, so the saving is only the difference between the two rates after fees and tax. A payment plan does not have the same effect, because GIC keeps accruing while a plan runs.
Sometimes. A loan to buy or refinance your own home is consumer credit, so the lender must check the loan is not unsuitable for you under responsible lending rules. Most lenders want the tax debt paid out at settlement from the loan funds, your returns and activity statements lodged, and a clear reason the debt arose. Some non-bank lenders accept alt doc income evidence for self-employed borrowers in this position.
Often, yes. An ATO debt does not rule out business loans for other purposes, but most lenders want it under control first: paid out from the new loan at settlement, or on a payment plan that is being kept. Lodged returns and activity statements, a current statement of account and a clear reason for the debt matter more than the balance. Some lenders decline on an ATO debt alone.
Sometimes. A default, or a tax debt the ATO has already reported, makes approval harder and rules out some lenders. Private and caveat lenders weight equity and the exit over the credit file, at a higher cost, and bad credit business loans exist for trading businesses. What usually decides it is whether returns are lodged and whether the debt has a clear, one-off cause.
A business tax debt can. The ATO may report it to credit reporting bureaus where the business has an ABN, at least $100,000 is overdue by more than 90 days, it is not engaging with the ATO to manage the debt, and there is no active Tax Ombudsman complaint about the intent to report. The ATO gives 28 days' written notice first, and the debt comes off the report once it is paid in full or you engage with the ATO, for example by keeping to a payment plan.
Yes, if you own property with enough equity. A second mortgage sits behind your existing lender and usually needs its consent; a caveat loan is faster and sits on the title without a registered mortgage. Both are short-term, cost more than a bank loan, and need a clear exit, such as a refinance or a sale, before a lender will fund them. The ATO is paid directly at settlement.
Usually, yes. Unlodged returns or activity statements are the most common reason an ATO debt refinance stalls, because the lender cannot see the true size of the debt until everything is assessed. Lodge first, even if you cannot pay, then get a current statement of account from the ATO. Some private lenders will fund on a dated lodgement plan, at a higher cost.
Paying the company's debt reduces the director penalty by the same amount, whether or not the amounts were reported on time. What late reporting removes is the other way out: appointing an administrator or small business restructuring practitioner, or the company beginning to be wound up, no longer remits the penalty, so payment is the only route. Finance can fund that payment, but the notice period is short, so get advice the day the notice arrives.
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