Your ATO payment plan has defaulted: what happens next and how to pay it

A payment plan is the ATO giving you time. A default is that time running out. Once a plan defaults, the arrangement that was holding back collection action is gone, and the full overdue balance is due at once.

For many businesses the default was not a refusal to pay. A slow quarter, a large BAS on top of the plan, or a single missed direct debit can tip it over. Whatever the cause, the steps that follow are predictable, and the earlier you act, the more of them you avoid. This page explains the ATO’s process as published in October 2026 and how a property-secured loan can bring it to an end.

How much time do you have before the ATO escalates?

The ATO does not publish a fixed timetable after default. It does publish the stages, and each one has its own trigger. Find where you are.

Where you are	What it means	First move
Missed an instalment; arrears letter received	The plan may still be saved	Pay the amount in the arrears letter by its date, or fund it now
Plan has defaulted	The whole overdue balance is immediately payable	Get a current statement; decide between a new plan and paying in full
Notice of intent to disclose received	28 days to act before credit reporting	Pay in full or re-engage effectively inside the 28 days
Director penalty notice issued	Recovery possible 21 days after issue	See your accountant today; funding can pay the company’s debt
Garnishee notice issued	Money is being diverted now	See our garnishee notice page

Property-secured amounts of $20k–$250k are possible the same day once documents are in, and up to $5m within 24–48 hours.

What does the ATO say happens when a plan defaults?

The ATO’s guidance on managing a payment plan, updated 9 October 2026, sets out the sequence:

• Arrears first. A missed payment can move a plan into arrears status. An arrears letter gives you an opportunity to bring the plan back on track before it defaults, and lists the minimum amount to pay.
• Default triggers. Not acting on an arrears letter, missing an agreed instalment by its due date, or not paying another tax obligation on time.
• Effect of default. The whole overdue balance becomes immediately payable, and the ATO may take firmer action.
• What next. The ATO says to contact it to discuss options, which may include re-negotiating a plan.

Its guidance on setting up plans adds two points that matter after a default. Debts of $200,000 or less may be set up online; above that, you need to call and provide financial details. And if you have defaulted on or cancelled two or more plans in the past 12 months, the ATO will ask extra questions.

Why does a default raise the stakes?

• Credit reporting. The ATO may disclose a business tax debt where the business has an ABN, at least $100,000 is overdue by more than 90 days, and it is not effectively engaging. A complying payment plan counts as engagement; a defaulted one does not. A notice of intent gives 28 days to act. See ATO debt on your credit file.
• Firmer action. Garnishee notices, director penalty notices and other recovery steps sit on the ATO’s published list.
• Cost. GIC is calculated on a daily compounding basis, and since 1 July 2025 the charge is no longer something a business can deduct.
• Harder to re-plan. Past defaults bring closer questioning next time.

How it works: paying the defaulted balance in one go

1. Pin down the true debt. Your tax agent pulls the ATO account, adds GIC to the expected settlement day, and lodges anything still outstanding so no surprise liability appears later.
2. Tell us about the security. Which property, whose name it is in, roughly what it is worth and the balance of any loan against it.
3. Pick the structure. Smaller balances often suit a caveat or a second mortgage sitting behind the bank; a debt-free property can carry a first mortgage instead.
4. Sign the offer. The Letter of Offer and the loan documents go to your solicitor for signing.
5. Pay the ATO on the day. Loan proceeds are remitted straight to the ATO account at settlement.
6. Close the loop. Your agent checks the account is clear and asks the ATO to stop any recovery or reporting steps already started.

The pillar on second mortgage business loans explains how a loan behind your bank works. Our existing page on paying an ATO debt with property equity goes deeper on the payment mechanics.

Should you try for a new plan or pay in full?

There is no universal answer, and the ATO’s discretion is part of the picture. A few questions help decide:

• Can the business keep a new plan and pay every new BAS on time? If not, the next default is only a quarter away, and the ATO will look harder at a third attempt.
• How long would a new plan run? The longer it runs, the more GIC accrues, and that GIC is now an after-tax cost.
• Is there director exposure? If director penalty notices are in play, paying the company’s debt quickly can matter more than the cheapest option.
• Is a credit-reporting notice on the way? Clearing or properly re-engaging within its 28 days keeps the debt off the business’s credit report.
• What is the property-secured alternative really for? A short loan that clears the ATO and is refinanced by a bank within months is a different proposition from one that just replaces one unpaid debt with another.

Your accountant should run both paths over the same period before you choose.

How does this compare with the alternatives?

Option	Clears the default?	Trade-off
Negotiate a new ATO plan	If the ATO agrees	Extra scrutiny after defaults; GIC keeps compounding
Pay from business cash	Yes, if available	Starves working capital
Unsecured online business loan	For small debts	Frequent repayments can recreate the squeeze; see secured vs unsecured business loans
Property-secured loan	Yes	Property at risk; interest and costs for the term
Do nothing	No	Escalating action, reporting and director exposure

Who it suits

• Businesses whose plan has defaulted, or is in arrears, and who own property with equity
• Companies whose directors are worried about penalty notices
• Businesses whose tax debt came from a one-off event, such as a bad quarter, a lost client or a large assessment
• Owners with a clear exit: an asset sale, a debtor, a contract or a later bank refinance

When this isn’t the right move

• A new plan is affordable and available. If the ATO will agree a plan you can genuinely keep, alongside current lodgements and payments, that may be cheaper.
• New tax debts are still building. If the business cannot pay current BAS, clearing the old debt will not stop the next default.
• The assessment is disputed. Objections and reviews are the right channel.
• There is no realistic exit. Without one, the debt simply moves from the ATO to your property.

What it costs (without the guesswork)

Each loan is priced on its security, loan-to-value ratio, term and exit, with the aim of the sharpest price your situation allows. The cost components:

• Interest. Charged for the agreed term and able to be prepaid or capitalised, which can mean no monthly loan repayments while the business rebuilds.
• Assessment fee. Small, set per loan, and printed on your Letter of Offer.
• Solicitor and registry costs for documenting and registering the security.

Compare the total with the GIC you would keep paying under a new plan, which is no longer deductible, and with the cost of escalation.

Documents you’ll need

• The ATO letter confirming arrears or default, plus an up-to-date ATO account statement
• Your tax agent’s note on which BAS and returns are lodged and which are still outstanding
• Identification for each borrower, director and guarantor, and for anyone whose property is offered
• For every security property: the address, the owner and the current loan balance
• The company’s ASIC details, or the trust deed if a trust is involved
• Something that proves the exit, such as a sale agreement, a refinance letter or major debtor invoices

How fast can the ATO be paid?

With no formal valuation required, the pace is set by paperwork. Once the ATO statement, ID and property details are with us, funding up to $5m is possible inside 24–48 hours, and property-secured amounts of $20k–$250k can be possible the same day. Send the ATO statement and property details to get a firm answer quickly.

Illustrative example: replacing a broken plan

Illustrative example: a Gold Coast builder had a $210k ATO plan that defaulted when a client paid late and a quarterly BAS went unpaid. The overdue balance, including the unpaid BAS and GIC, is now $236k. The builder’s company owns a small industrial unit worth about $700k with no debt. A private first mortgage at an illustrative LVR band of 50% gives $350k of capacity, comfortably above the need.

Step	Amount
Loan amount chosen	$260k
Less capitalised interest allowance for nine months (illustrative)	$18k
Less loan costs	$6k
Paid to the ATO at settlement	$236k

The ATO balance is cleared in one payment, the builder brings lodgements up to date, and the late client’s payment plus a bank refinance of the unit inside the term repay the loan. This illustration is not a client record.

Key terms

• Arrears status: a plan that has missed a payment but has not yet defaulted.
• Default: a plan that is no longer active because its conditions were not met.
• Overdue balance: the tax debt past its due date, plus GIC.
• Notice of intent to disclose: the ATO’s 28-day warning before reporting a business tax debt to credit bureaus.
• Director penalty notice: a notice that can make directors personally liable for certain company tax and super debts.

Other urgent situations we fund

• ATO garnishee notices
• Funding a restructuring plan contribution
• Covering Payday Super and payroll

Based on the Gold Coast? See our page for a private lender on the Gold Coast. For the long view, read ATO payment plan vs secured loan.

Plan defaulted? See if you qualify

Give us the overdue balance, the property you can offer, what is owing on it and how a short loan would be repaid. There is no credit check to enquire. Your enquiry goes to one direct lender, our lending partner fundU, and a specialist who works with ATO debt every week reads it.

Straight figures, including any unlodged BAS, mean the answer you get on the first call is one you can rely on. Start the 60-second enquiry.