Business loans for tax debt: pay the ATO, no judgement

Tax debt is the single most common reason business owners pick up the phone to us, and it almost never means someone has done anything wrong. GST gets collected and spent on wages during a tough quarter. A big customer pays late, so the BAS gets paid late too. An amended assessment arrives for a year everyone thought was finished. Before long, interest is compounding, the ATO’s letters are getting firmer and the bank refuses to talk until the debt is gone.

We don’t judge any of that. Own property with some equity? Then we can use that equity to pay the ATO in full, directly at settlement, and give you six months with nothing to pay while the business gets back on an even keel. The tax debt is the reason for the loan, not a reason to refuse it.

This page covers which tax debts a secured loan can clear, how the money gets to the ATO, why paying out can beat a payment plan, and how to check your deal in about a minute.

Which tax debts can a secured business loan pay?

Almost any business tax liability owed to the ATO, and several owed to state revenue offices too:

• BAS debts: GST, PAYG withholding from wages and PAYG instalments.
• Income tax: company, trust or individual tax on business income, including amended assessments.
• Superannuation: unpaid super guarantee and the super guarantee charge, along with the penalties attached.
• Interest and penalties: the general interest charge and failure-to-lodge penalties sitting on the account.
• Other business taxes: fringe benefits tax, state payroll tax and land tax bills.

Where several are owed at once, they can all be paid in the same settlement. If GST is part of a property purchase rather than a debt, see funding GST on a commercial property purchase.

Where are you up to with the ATO?

The right move depends on how far the ATO has gone. Each stage below has its own page with the detail.

Where things stand	What it usually means	Read more
Overdue BAS or tax, no action yet	Interest compounding daily; the cheapest time to act	Paying ATO debt with property equity
A payment plan you can’t keep up	Instalments on top of current tax are squeezing cash flow	ATO payment plan vs a secured loan
A defaulted payment plan	The whole overdue balance is due now	ATO payment plan defaulted
A garnishee notice	Your bank or customers must pay the ATO instead of you	ATO garnishee notice
A director penalty notice	Directors can become personally liable for certain company debts	Director penalty notices and property equity
Debt reported to credit bureaus	The tax debt now shows on the business’s credit file	ATO debt on your credit file
A statutory demand or winding-up application	Court deadlines are running	Responding to a statutory demand

Wherever you are in that table, the earlier you call, the more choices you have.

Why paying it out can beat a payment plan

Payment plans have their place, and the ATO offers them for good reason. But for many businesses with property behind them, clearing the debt in one payment is cheaper and calmer. Three reasons stand out.

The interest stops being deductible. Since 1 July 2025, businesses can no longer claim a tax deduction for the ATO’s general interest charge or shortfall interest charge. Interest on a business loan used for a business purpose generally still is, so the after-tax gap between the two can matter. Why ATO interest stopped being deductible works through it, and your accountant can confirm the position for your business.

A plan adds instalments to a stretched budget. Every month you pay the plan instalment and keep up with current BAS, super and income tax. With our loan, interest is capitalised for the first six months, so there’s nothing to pay while you catch up on lodgements and rebuild cash.

Escalation stops. Once the ATO account is cleared, there’s nothing left to garnishee, report or enforce. That’s often worth more than any spreadsheet comparison, because it lets you get back to running the business instead of managing the tax office.

Why the tax debt doesn’t count against you here

A bank sees an overdue ATO account and assumes the business is failing. We see a business that has property, a debt with a known balance and a clear fix. Tax debt and credit problems never knock a deal out by themselves. With no serviceability test, overdue returns or a weak year on paper don’t block the loan either.

What we focus on instead is simple: the equity in the property, the purpose of the money and how the loan will be repaid. If those stack up, the tax debt is just the line item the loan pays out. Our page on bad credit business loans explains the same approach for defaults, judgments and other blemishes.

How the money actually gets to the ATO

You don’t handle the funds. On the day of settlement:

1. We confirm the payout figure. You provide a current ATO statement of account, and the figure is updated to the settlement date so interest accrued in the meantime is covered.
2. The ATO receives the money straight from settlement, quoting the payment reference number for each account, whether that’s the integrated client account, an income tax account or a super guarantee charge account.
3. Any other debts are paid at the same time, such as a supplier judgment or a short-term online loan, if they’re part of the deal.
4. The balance, if any, goes to your nominated business account for working capital.
5. You get confirmation and can ask the ATO to withdraw any garnishee notice and update its records.

Paying the ATO directly gives you certainty that the debt is gone and gives us certainty that the loan did what it was meant to.

Super, Payday Super and personal risk for directors

Unpaid super deserves its own mention because it carries personal risk for company directors. Under the director penalty regime, directors can become personally liable for a company’s unpaid PAYG withholding, super guarantee charge and GST. Where lodgements are more than three months late, the options for getting out of a director penalty can narrow sharply.

Payday Super also started on 1 July 2026, so employer super must now reach funds within days of each payday rather than quarterly. Businesses that were already behind can feel that change fast. Covering Payday Super and payroll with equity explains how property equity can carry the transition. If a director penalty notice has arrived, speak with your accountant or adviser straight away, and call us at the same time so the funding is lined up if paying in full is the answer.

How much can you borrow to pay the ATO?

We lend between $20,000 and $5,000,000, and your own ceiling is set by the equity in your property. Total lending, including any existing mortgage and our loan, can reach up to 80% of value on residential security and up to 70% on commercial security. We assess the property ourselves, so there’s no sworn valuation to book or pay for.

Illustrative example. A transport company owes around $260,000 across GST, PAYG withholding and the super guarantee charge, and the ATO has issued a garnishee over its trading account. One director owns a home worth about $1,300,000 with $500,000 still on the bank loan. Eighty per cent of the home’s value is $1,040,000, so total headroom is about $540,000, and a second mortgage of around $280,000 sits comfortably inside it, behind the bank. The loan pays the ATO in full at settlement, the garnishee is withdrawn, and nothing is payable for six months while the company catches up on lodgements and lines up a refinance. Figures are rounded and aren’t an offer.

Try your own numbers in the borrowing calculator; it takes less than a minute.

Getting the exit right

A tax debt loan works best when it has a clear way out. The most common exits are:

• A refinance once lodgements are current and the ATO account is clean, often to a bank that wouldn’t lend while the debt was there.
• The sale of a property, such as an investment property, spare land or business premises.
• A known payment into the business, such as a large contract, a retention release or a tax refund.
• Trading cash flow, used to pay the loan down in lumps over the term.

Because terms are open, there’s no fixed maturity date to race, and you can repay early at any time with no penalty. If your exit is a refinance, keep lodging on time during the loan; it’s the single thing that makes the next lender’s decision easy.

Ready to clear the ATO?

Owing the tax office doesn’t make you a bad business, and it doesn’t make you a bad borrower if you own property with equity. Check my deal takes about a minute and asks for the loan amount, the property, the borrower, the exit and your contact details. Nobody runs a credit check to answer that first question, and a specialist calls you, usually within the hour during business hours.

Prefer to talk first? Ring 1300 93 83 87 with your ATO statement handy. From a clean, complete scenario, the ATO can be paid in as little as 24 hours. For the bigger picture on why lending against equity works for owners in your position, read the benefits of secured business finance, then check your deal.