Quick answer
Businesses with ATO debt can usually choose between an ATO payment plan, a property-secured loan that pays the debt in full, selling an asset, refinancing existing debt, or formal restructuring. A payment plan suits debts the business can repay from cash flow. A secured loan suits larger debts, defaulted plans or director penalty risks. Restructuring suits businesses that cannot meet their debts at all.
Key points
- Doing nothing usually leads to firmer ATO action
- Payment plans suit debts that cash flow can realistically repay
- Secured loans clear the debt in one payment
- Director penalty risks make speed important
- Restructuring is for businesses that cannot meet debts as they fall due
Tax debt is a decision, not just a bill
Most businesses that owe the ATO did not plan to. A slow quarter, a large client paying late, a renovation that ran over or a growth spurt that absorbed cash can all leave GST, PAYG withholding or income tax unpaid. The question then is not whether the debt exists but what to do about it. The options have very different costs, risks and consequences, especially for directors.
Option one: do nothing
Doing nothing is still a choice, and usually the most expensive one. General interest charges continue to accrue. The ATO’s published approach includes firmer action for businesses that do not engage, including garnishees served on the business’s bank, customers or card processor, DPNs that make directors personally liable for withholding, GST and SGC, and reporting of eligible overdue tax debts to credit agencies. Each step narrows the options and makes the business harder to finance. See what ATO debt escalation looks like.
Option two: an ATO payment plan
The ATO can agree to payment plans that let a business repay a debt in instalments. A plan suits a business that can realistically meet the instalments from cash flow while also paying current tax as it falls due. The ATO publishes a payment plan estimator and guidance on setting up plans.
Payment plans work well when the debt is moderate, trading is healthy and the business has a good compliance history. They work poorly when instalments are optimistic, when new debts keep arriving, or when a previous plan has defaulted. A defaulted plan can leave the business worse off than before. See defaulted ATO payment plans.
Option three: a property-secured loan
A property-secured loan pays the ATO in full, usually directly at settlement. The business then owes the lender instead, on a defined term with interest prepaid or added to the loan, repaid from a sale, a refinance or trading. This suits:
- larger debts that instalments cannot realistically cover
- situations where a director penalty notice has been issued or is likely
- businesses facing a garnishee notice that is freezing cash flow
- businesses planning a bank refinance that cannot proceed while tax arrears exist
- businesses with a known exit, such as a property sale, that will clear the debt anyway but not in time
See ATO debt loans for how these loans are structured.
Option four: sell an asset
Selling a property, equipment or another asset can clear the debt without new borrowing. The challenge is time: sales take weeks or months, and the ATO may not wait. A short secured loan can bridge until the sale settles, combining options three and four.
Option five: refinance existing debt
If the business owns property with equity, a full refinance can repay existing loans and the tax debt in one transaction. This suits businesses whose existing finance is also expensive or expiring. See business loan refinance.
Option six: formal restructuring
If the business cannot pay its debts as they fall due, even after dealing with the tax debt, formal options such as small business restructuring, voluntary administration or liquidation may be appropriate. ASIC publishes information on these processes for directors. Restructuring is a significant step with lasting consequences, and it should be considered with a registered insolvency practitioner or experienced adviser.
The director penalty factor
For companies, the director penalty regime changes the calculation. Directors can become personally liable for unpaid PAYG withholding, GST and super guarantee charge. Where amounts were reported late or not at all, the penalty can only be remitted by paying the liability in full. That makes speed and certainty critical, and often tips the balance towards paying in full with a secured loan. Our guide on director penalty notices explains the rules.
Compare your options with a specialist before the next ATO deadline.
How to compare the options
| Question | Points towards |
|---|---|
| Can cash flow comfortably meet instalments plus current tax? | Payment plan |
| Is there a director penalty risk? | Paying in full, often with a secured loan |
| Is a garnishee notice affecting trading? | Paying in full |
| Is a property sale or refinance coming? | Secured loan as a bridge |
| Can the business meet its debts at all? | Professional restructuring advice |
Illustrative comparison
Illustrative only. A manufacturing company owes the ATO a large sum after a difficult year. It could propose a two-year payment plan, but instalments would absorb most of its free cash flow, and two directors have received director penalty notices relating to late-reported PAYG withholding. The directors own an investment property with good equity. A secured loan pays the ATO in full, removing personal liability and the risk of garnishee action. The company then refinances with its bank a year later, after several quarters of clean lodgements.
Questions to ask your accountant
- What is the full balance, including penalties and interest charges?
- Are any lodgements outstanding?
- Is there director penalty exposure, and of which type?
- Can the business afford instalments plus current obligations?
- What is the plan to stay current after the debt is resolved?
After the debt is dealt with
Whatever option you choose, the business needs to stay current: lodge on time, keep tax money separate and pay as you go. From 1 July 2026, Payday Super requires super to be paid with wages so it reaches employees’ funds within seven business days. Build these into cash flow planning.
The hidden costs of each option
Each option carries costs beyond the obvious. Payment plans continue to accrue general interest charges on the outstanding balance and tie up cash flow for their duration. A secured loan has establishment and legal costs and interest, but removes ATO interest charges and collection risk. Asset sales involve selling costs and possibly capital gains tax. Restructuring involves practitioner fees and lasting effects on the business’s credit standing. Comparing only the headline cost of each option can be misleading; compare the full cost and the risks each one removes. Your accountant can help put the numbers side by side for your specific debt, cash flow and director position before you commit to any path.
Choose with clear numbers
The right choice depends on the size of the debt, the business’s cash flow, the director penalty position and the assets available. Tell us the ATO balance, any notices you have received, the property you can offer and your exit, and a specialist will show you how a secured loan compares with other options. A first enquiry involves no credit check, your file stays with one team, and a current statement from the ATO portal keeps the comparison exact. Discuss your tax debt.
Frequently asked questions
Will the ATO always agree to a payment plan?
Not always. The ATO considers each case, including past compliance and whether the plan is realistic.
Does a secured loan cost more than a payment plan?
It depends on the debt, the term and the costs involved. Compare total costs, but also the risks each option removes, such as personal liability for directors.
Can I combine options?
Yes. Some businesses use a secured loan to clear part of a debt and a payment plan for the rest, or sell an asset to reduce the amount borrowed.
When should I talk to an insolvency practitioner?
If the business cannot pay its debts as they fall due, even after dealing with the tax debt, get advice promptly.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a secured lending specialist calls you back.