Quick answer · Q.B04
Yes, often. ATO debt doesn't automatically stop a business loan. Lenders look at how much is owed, whether you're on a payment plan and keeping to it, whether lodgements are up to date, and whether the debt has been reported to credit bureaus. Many businesses use a loan to clear or reduce the tax debt itself. Property security usually gives the most flexibility, though unsecured options are sometimes possible.
Key points
- ATO debt is considered case by case; a managed debt on a payment plan reads very differently from an ignored one.
- The ATO can report business tax debts of $100,000 or more, overdue by more than 90 days, to credit bureaus if you're not engaging.
- Many businesses borrow specifically to pay out or reduce their tax debt.
- Up-to-date lodgements matter almost as much as the balance owed.
- ATO reporting trigger
- $100k+ overdue 90+ days, not engaging
- Online payment plan
- Debts of $200k or less
- Our approach
- Case by case
Why doesn’t ATO debt automatically rule me out?
Because tax debt is extremely common in small business, and lenders know it. A quarter of strong trading can still leave a BAS bill that lands at the worst moment. What a lender cares about isn’t whether you’ve ever owed the ATO — it’s whether the debt is understood, managed and not growing out of control.
Lenders typically ask:
- How much is owed, and what for — GST, PAYG withholding, income tax, super?
- Is there a payment plan, and is it being kept?
- Are lodgements up to date? Unlodged BAS or returns make it hard to know the real position.
- Has the debt been reported to credit bureaus?
- What will the loan do — clear the debt, reduce it, or fund something else while the plan continues?
What are the ATO rules worth knowing?
A few verified rules shape the conversation:
| Rule | What the ATO says |
|---|---|
| Credit reporting of business tax debt | May disclose if you have an ABN, at least $100,000 overdue by more than 90 days, and you’re not effectively engaging; 28 days’ written notice first |
| Online payment plans | Owe $200,000 or less and you may be able to set one up through online services |
| General interest charge | Calculated on a daily compounding basis on the overdue amount |
| Deductibility of ATO interest | ATO interest charges incurred from 1 July 2025 are no longer deductible |
Being on a payment plan you’re complying with counts as engaging with the ATO, which can prevent disclosure. That’s one reason acting early matters.
Can I use a business loan to pay the ATO?
Yes — it’s one of the most common purposes we see. Using finance to clear or reduce a tax debt can:
- Stop the general interest charge compounding on the cleared amount.
- Prevent escalation to firmer ATO action or credit reporting.
- Replace an unaffordable payment plan with a structure that fits cash flow.
- Tidy the business’s position before a bigger move, such as a sale or refinance.
Whether it makes financial sense depends on comparing the total cost of the loan with the cost of the plan. The detail is in paying tax or BAS with a business loan, and our explainer on what a loan costs shows how to compare in dollars.
Which loan routes work with ATO debt?
- Property-secured loans — usually the most flexible. The property gives the lender comfort even when the tax position is messy. Amounts from $20,000 to $5,000,000.
- Unsecured or cash-flow loans — possible for trading businesses with strong statements, especially where the debt is on a plan and lodgements are current. Typically $5,000 to $500,000.
- A combination — for example, clearing part of the debt with a loan and keeping a smaller payment plan for the rest.
If you’re unsure which applies, ask a real person — there’s no credit check when you first enquire, and tax debt won’t make us flinch.
What if my lodgements are behind too?
It’s more common than you’d think, and it’s workable. A lender needs to understand the true position, so an accountant’s estimate of what the outstanding returns and BAS will show is often part of the application. Getting lodgements moving, even before they’re all complete, strengthens the case. See do I need up-to-date tax returns.
How does an ATO-debt application come together? (Illustrative example)
Illustrative only — invented business, no real figures.
A Newcastle hospitality group owes about $185,000, mostly GST and PAYG withholding from a difficult winter. It’s on an ATO payment plan it’s struggling to meet, and has received notice that the debt may be reported.
- Trading has recovered: the last four months of statements are solid.
- The owners have commercial property with reasonable equity.
- Lodgements are current.
A property-secured loan to clear the full debt removes the reporting risk, stops the compounding interest on that balance and replaces an unaffordable plan with repayments set around the business’s seasonal pattern. The key evidence: the ATO statement of account, the recent statements and a simple forecast showing the new repayments fit.
How does ATO debt interact with other credit issues?
Tax debt rarely arrives alone. When cash is tight, it’s common to see a supplier default, a late repayment or two, and a growing ATO balance at the same time. Lenders understand that pattern, and they look at it as one story rather than several separate problems:
- What caused the squeeze? A lost customer, a bad season, a big job that paid late, rapid growth that outran cash.
- Has the cause been fixed? New customers, cost cuts, better debtor collection, a recovered season.
- Does the loan solve the whole problem? Clearing the ATO debt but leaving a supplier default unpaid may just move the pressure elsewhere.
A single, well-structured loan that clears the tax debt and the most pressing arrears — and leaves repayments the business can carry — is usually viewed more favourably than a series of small fixes. If credit issues are part of your picture, read business loans with bad credit as well.
What should I avoid?
- Ignoring ATO letters. Engagement is what keeps options open.
- Paying the ATO with money set aside for wages or super. That can create a bigger problem.
- Stacking several short-term loans to meet plan instalments.
- Waiting until the notice period runs out before looking at options.
Get a calm, practical read on your tax debt
Tax debt is something we deal with week in, week out. Enquiring doesn’t trigger a credit check, your details stay with one team instead of being passed around lenders, and a real person looks at the debt, your lodgements and your trading together. Please state the ATO balance and whether you’re on a plan accurately on the form — it’s the fastest way to the right option.
Frequently asked questions
When does the ATO report tax debts to credit reporting bureaus?
The ATO says it may disclose a business's tax debt when the business has an ABN, at least $100,000 is overdue by more than 90 days, and the business isn't effectively engaging to manage the debt. It gives written notice with 28 days to act first.
Can I set up an ATO payment plan myself?
If you owe $200,000 or less, the ATO says you may be able to set up a payment plan through its online services. Larger debts need to be discussed with the ATO directly.
Is it better to use a loan or an ATO payment plan?
It depends on the cost and the pressure. A payment plan keeps the ATO engaged but general interest charge keeps accruing, and it's no longer tax deductible from 1 July 2025. A loan may cost more or less overall and can stop escalation. Compare both in dollars.
Does being on an ATO payment plan stop me getting a loan?
No. Being on a plan and meeting it is often viewed positively, because it shows the debt is being managed. Lenders will want to see the plan and the repayment history.
Do I need my tax returns up to date to borrow?
Up-to-date lodgements help a lot, but some lenders can work with overdue returns if there's a plan to catch up. Disclose where you're at from the start.