Quick answer
There's no single best way to clear an ATO debt. A payment plan suits smaller debts you can pay down steadily. When the debt is large, growing or threatening credit reporting or director penalties, refinancing it with a property-secured loan is often the strongest option, and a caveat loan suits a short-term fix with a clear exit. Since 1 July 2025, ATO interest charges are no longer tax deductible.
Key points
- ATO general interest charge incurred from 1 July 2025 is no longer tax deductible.
- Debts of $200,000 or less may be set up on a payment plan through online services.
- The ATO may report business tax debts of $100,000+ overdue by 90+ days to credit bureaus.
- Directors can become personally liable for unpaid PAYG withholding, GST and super guarantee charge.
- Small, steady debt
- ATO payment plan
- Large or escalating debt
- Property-secured refinance
- Short gap, clear exit
- Caveat loan
A tax debt has a way of growing quietly. One quarter’s BAS gets paid late, the next one overlaps, and before long there’s a balance with interest compounding daily. The right fix depends on how big the debt is, how fast it’s growing, what the ATO is doing about it, and what security you have.
What changed, and why does it matter?
Two rule changes shift the maths:
- ATO interest is no longer deductible. The ATO confirms that taxpayers can no longer claim a deduction for the general interest charge (GIC) or shortfall interest charge (SIC) that accrues from 1 July 2025 onwards. Carrying a tax debt now costs more after tax than it used to.
- Credit reporting. The ATO may disclose business tax debts to credit reporting bodies once at least $100,000 is overdue by more than 90 days and the business isn’t engaging with the ATO to manage it.
For company directors, there’s also the director penalty regime, under which a company’s directors can end up personally owing its unpaid PAYG withholding, GST and super guarantee charge.
What are the realistic options?
| Test | ATO payment plan | Property-secured loan | Caveat loan | Unsecured loan |
|---|---|---|---|---|
| Suits | Manageable debts, steady income | Large or escalating debts | Short-term fix, clear exit | Smaller debts, strong trading |
| Security | None | Property | Property (caveat on title) | Director guarantee |
| Term | Set by the ATO | Longer | Short | Shorter |
| Interest | GIC, not deductible from 1 July 2025 | Lender pricing, generally deductible for business purposes | Lender pricing, short term | Lender pricing |
| Risk | Default if a future BAS is missed | Property on the line | Cost if the exit slips | Tight repayments |
Our verdict on clearing an ATO debt
Our verdict: it depends on size and pressure
- Best for each case
- Payment plan for a manageable debt with steady income. Property-secured refinance for large or escalating debts. Caveat loan for a short gap with a clear way out.
- Not for
- Borrowing to clear tax while the business keeps falling behind on new BAS. Fix the cause first, or the debt simply returns.
- Check before you sign
- The total cost of each option over the same period, what happens if a repayment is missed, and your accountant's view on tax treatment.
A payment plan is the natural first stop for a debt you can realistically repay from trading. Owners with a balance of $200,000 or under can usually arrange the plan themselves through ATO online services. GIC continues to accrue on the outstanding balance, so the longer the plan, the more interest you’ll pay.
A property-secured refinance often wins for larger debts, or when the ATO is already escalating. You swap a debt that can trigger credit reporting and director penalties for a loan on known terms, repaid over a term that suits your cash flow. Interest on a loan used for business purposes is generally deductible; confirm with your accountant.
A caveat loan suits a short, sharp fix: you have a property sale, refinance or large receivable coming and need to clear the ATO now. Read our caveat loan verdict before going down this path, because the cost climbs if the exit is delayed.
Not sure which camp you’re in? Tell us the size of the debt and what the ATO has sent you, and a specialist will lay out the options plainly.
Illustrative example: a building company with a growing BAS debt
Illustrative only. A small building company fell behind on BAS during a slow year. The balance has climbed past six figures, a payment plan defaulted when a client paid late, and the directors have received correspondence about their obligations.
A fresh payment plan was possible, but the directors wanted the debt off the ATO’s books entirely. One director owns a home with equity. A property-secured loan over a longer term cleared the debt and gave a repayment the business could carry. They also changed how they set aside GST each week so the problem wouldn’t recur.
Verdict for this company: property-secured refinance, plus a fix to the underlying cash habit.
Why fixing the cause matters as much as the debt
Clearing an ATO debt with a loan only works if the business stops creating new tax debt. Before you borrow:
- Set aside GST and PAYG withholding into a separate account each time you’re paid.
- Lodge on time even when you can’t pay, so the ATO sees you engaging.
- Look at why the debt built up: margins, slow-paying customers, or growth outrunning cash.
If you have other debts as well, our guide to consolidating business debts covers when rolling them together makes sense. If the tax debt has marked your credit file, read the best loan when you have credit issues.
What do lenders need to see?
Expect to provide the latest ATO statement of account, details of any payment plan, recent BAS, bank statements and, for property-secured options, property details. Being upfront about any ATO correspondence helps the lender work out the right structure.
Ready to deal with it?
The sooner you act, the more options you have. Start a confidential enquiry and a specialist will look at the debt, the security available and the realistic way out.
No credit check is run when you first make contact, and your situation stays with one person rather than being broadcast to a string of lenders. Be specific about the amount owed, any plan in place and any notices received; it’s the fastest way to the right answer.
Frequently asked questions
Is it better to use a payment plan or a loan to pay the ATO?
A payment plan is often the simplest choice for a manageable debt. A loan can be better when the debt is large, when the ATO is escalating, or when you'd rather deal with one lender on known terms. Compare the total cost of each, remembering ATO interest is no longer deductible.
Can I get a business loan if I have an ATO debt?
Yes, ATO debt is considered case by case. Property security widens the options considerably. Be upfront about the debt, any payment plan and any notices you've received.
What happens if I ignore an ATO debt?
The ATO can take firmer action, including reporting the debt to credit bureaus in some cases, issuing director penalty notices, and garnishee notices. Engaging early keeps more options open.
Is GIC tax deductible?
Not any more for interest incurred on or after 1 July 2025. The ATO confirms taxpayers can no longer claim a deduction for general interest charge or shortfall interest charge from that date.
Will the ATO report my debt to credit agencies?
The ATO may disclose a business tax debt when at least $100,000 is overdue by more than 90 days, the business has an ABN, and it isn't actively engaging with the ATO to manage the debt.