Owing the ATO: what your options actually are

Tax debt has a way of building quietly. A BAS that couldn't be paid, a bigger assessment than expected, a year when the business needed the cash more than the ATO did. Then interest starts compounding on top.

Why it's worth dealing with early

• Interest compounds. The ATO's general interest charge is worked out daily on unpaid amounts, and it compounds
• It's no longer deductible. General interest charge incurred from 1 July 2025 can't be claimed as a tax deduction, so it now costs more than it used to
• It can show up on your business's credit file. The ATO can report a business's tax debt to credit reporting bureaus if it has an ABN, owes at least $100,000 that's more than 90 days overdue, and isn't engaging with the ATO to manage it
• It holds up other finance. Lenders want to see tax under control, so an outstanding balance can stall an unrelated loan

Option one: a payment plan with the ATO

For many people and businesses, the first step is a payment plan. The ATO says that if you owe $200,000 or less, you may be able to set one up yourself through its online services or self-help phone line; larger debts are arranged by phone. Interest generally continues while the plan runs, and you need to keep lodging and paying new obligations on time.

Your accountant or registered tax agent can deal with the ATO for you.

Option two: refinance it

Where there's equity in property, or the business can support a loan, the tax debt can sometimes be refinanced: paid out in full and replaced with a structured loan. That stops the general interest charge building, and puts the debt on a rate and term you can plan around.

It isn't automatically cheaper. Rolling tax debt into a 30-year home loan can cost more in total interest over time, and it moves an unsecured debt onto your property. The comparison that matters is the total cost of each path.

Option three: restructuring, for companies

An incorporated small business in financial difficulty may be able to use the small business restructuring process, where a registered restructuring practitioner helps put a plan to creditors. It's a formal insolvency process with its own eligibility rules, and it calls for specialist advice.

What to have ready

• Your ATO statement of account or portal report
• Recent tax returns and BAS
• Details of any property you own and your existing loans
• Your accountant's contact details

Where we come in

We look at the whole position, tax and everything else, and work out whether refinancing makes sense and what it would cost over its full term. We arrange the finance; payment arrangements with the ATO stay with you or your tax agent. More on debt advice.

General information only. This article does not take into account your objectives, financial situation or needs, and it is not personal financial, legal or taxation advice. Lending criteria, fees and conditions apply, and all applications are subject to lender assessment and approval.