Private mortgage to pay an ATO debt: whose property, how much, and what next

Deciding to clear a tax debt with property equity is the easy part. The decisions that follow are where owners either fix the problem for good or find themselves back on the phone to the ATO six months later: which property to use, how much to borrow, and what to change once the debt is gone.

If you want the mechanics of how the money reaches the ATO at settlement, our page on paying an ATO debt with property equity covers it step by step. This page is about getting the decisions around it right.

Why does it matter whose property secures the loan?

A company’s tax debt belongs to the company. But in practice, the ATO’s director penalty rules mean directors can become personally liable for certain unpaid company amounts: PAYG withholding, GST and the super guarantee charge. That shifts the question of which property to use.

Property available	When it suits	What to weigh
Owned by the company itself	The company has property with enough equity	Keeps the debt and the security in the same entity
A director’s home or investment property	The debt includes amounts that could fall on the director personally	Puts personal property at risk for a company debt; co-owners must agree
Owned by a related family trust	The trust deed allows the trustee to secure another party’s debt	Needs the deed and trustee signatures
A mix of properties	No single title has enough equity	More signatures and possibly more bank consents

There’s no single right answer. A director who could be personally liable for the debt anyway may see sense in using personal property to make it go away. Your accountant should be part of that decision. Our page on a private mortgage for companies and trusts explains how each structure signs.

How much should you actually borrow?

Borrowing exactly the balance on today’s statement is a common mistake. The amount should cover everything needed to make the ATO problem end:

Item	Why it belongs in the loan
The current overdue balance	The debt itself
Interest until the settlement date	The ATO says general interest charge compounds daily, so the balance keeps growing until it’s paid
The next activity statement due	So the account doesn’t go straight back into debt
Any unlodged returns or statements	Lodging them may add to what’s owing
Commitment fee and legal costs	So the net amount still clears the debt

Since 1 July 2025, general interest charge and shortfall interest charge incurred on or after that date are no longer tax deductible, according to the ATO. That makes leaving a debt to accrue more expensive than it used to be, and is worth factoring into how quickly you act.

Once you have the figure, the 60-second loan check will show whether your property supports it.

Is the 3-month rule a reason to move faster?

For directors, it can be. The ATO explains that where PAYG withholding or GST is reported more than three months after its due date, or not reported at all, a director penalty can only be remitted by paying the company’s liability in full. Estimated amounts are treated as never reported. For the super guarantee charge, the same applies if amounts aren’t reported by the SGC due date.

Put simply, if lodgements have been late, options like administration may no longer remove a director’s personal liability, and full payment becomes the main route. Where full payment is the goal, a private mortgage is one of the few ways to raise the money quickly. Our guide to the director penalty notice and property equity goes deeper.

Should you pay it out or take a payment plan?

A payment plan can be the cheaper answer, and you should look at it honestly. The ATO’s guidance makes a few things clear: general interest charge keeps accruing during a plan, you must keep lodging and paying new debts on time, and if you don’t, the plan may default and the full overdue balance becomes immediately payable.

A private mortgage tends to win when:

• the debt is large and a plan would run for years at growing cost;
• the business can’t realistically keep up instalments and new tax at the same time;
• a plan has already defaulted (see ATO payment plan defaulted);
• a director penalty or credit listing makes full payment urgent.

Our guide to an ATO payment plan vs a secured loan compares the two in full.

What should you send about the ATO side?

The property paperwork is the same as any private mortgage. The tax side needs its own small bundle, and having it ready shortens the first call considerably:

• A current statement of account from the ATO for each account with a balance, such as the activity statement and income tax accounts.
• Any notices received: a director penalty notice, a notice of intent to disclose the debt, or a garnishee notice, with their dates.
• The lodgement position, ideally a short note from your accountant listing anything still to lodge and an estimate of what it may add.
• The payment details the ATO has given you for each account, so funds can be paid directly at settlement.
• Any payment plan correspondence, including whether it is current or has defaulted.

If an ATO notice has a date on it, put that date in the first line of your enquiry. Everything else is organised around it.

Illustrative example: sizing for the whole problem

A Cairns refrigeration contractor owes the ATO $210k in overdue activity statements, and the director has received a director penalty notice. The next quarter’s statement, around $45k, is due in five weeks. The director owns an investment unit with a small bank loan.

Illustrative only. Rather than borrowing $210k, the loan is sized at $275k: the balance, about $10k of interest to settlement, the next statement and around $10k of fees and legal costs. Settlement pays the ATO directly within the 21-day window; the next statement is paid on time from the same funds. Interest on the private mortgage is capitalised for 6 months, so the business has no loan repayments while it rebuilds cash. Ten months later the director sells the unit and repays the loan.

What should happen after the ATO is paid?

Settlement clears the debt. These steps keep it cleared:

1. Get written confirmation that the account is at nil and any director penalty is remitted.
2. Check any credit listing. The ATO says reported information is removed once you no longer meet the criteria. Keep the payment confirmation in case a bureau record needs chasing. Our guide to ATO debt on your credit file explains how listings work.
3. Bring every lodgement up to date and keep it there.
4. Set up a tax account. Move GST and PAYG withheld into a separate account as they’re collected.
5. Work the exit. A refinance or sale is easier once the ATO history is clean.

Ready to close the ATO chapter? See if you qualify

We work with business owners carrying tax debt every week, and it never counts against you on its own. Tell us about the property, what is owing on it, the ATO balance and your deadline, and a specialist will help size the loan so the debt actually ends.

The check takes about 60 seconds, and there’s no credit check when you enquire, so it won’t affect your credit file. It goes to a single direct lender, never sprayed across a list of funders. A real person calls you. Please give accurate figures for the ATO balance and the property debt; they decide the loan size.

See if a private mortgage can clear your ATO debt →