Covering payroll when cash arrives late

Payroll does not wait

Staff must be paid on time. Employers have legal obligations under awards, agreements and the Fair Work framework, and beyond the law, a missed pay run damages trust in a way that is hard to repair. Yet payroll often falls due before the money that funds it arrives. A large customer pays at sixty days instead of thirty. A government contract pays monthly in arrears after inspection. A new project needs a bigger team weeks before its first claim.

When that gap opens, many businesses do the wrong thing: they use money set aside for GST and PAYG withholding to pay wages, creating a tax debt that becomes a bigger problem later.

Why property security suits payroll gaps

A payroll gap is usually temporary and the repayment source is identifiable: the overdue invoice, the contract’s first payment, the end of the quiet season. That makes it well suited to a short-term secured loan. Because the loan relies on property and a defined exit, it can be larger and more flexible than turnover-based unsecured finance, and interest can be prepaid or added to the loan so there is nothing extra to pay from the stretched account.

Sizing the loan

Cost per pay cycle	Include
Net wages	All employees and casuals
PAYG withholding	To remit to the ATO on time
Super	Paid with wages under Payday Super from 1 July 2026
Payroll tax	Where the business is above the state threshold
Workers compensation and leave provisions	As relevant

Multiply by the number of pay cycles until the gap closes, then add a buffer. Under Payday Super, super leaves the account with every pay run, so each cycle’s cash requirement is higher than under the old quarterly system. See super guarantee debt.

Work out your payroll gap with a specialist and fund it properly.

The exit

• Overdue invoices collected. Ideally with evidence of the debtor’s commitment to pay.
• Contract payments begin. A payment schedule from a creditworthy client.
• Seasonal recovery. Historical trading shows when income rises.
• Refinance or property sale. As a backup or primary exit for longer gaps.

If a key debtor is unlikely to pay, business.gov.au has guidance on what to do when you have not been paid. Factor that risk into the term and the backup exit.

An illustrative payroll gap

Illustrative only. A security services company wins a large event contract that requires doubling its roster for three months, with the client paying monthly in arrears. Its unsecured facility is too small for the wage bill. A second mortgage over the owners’ investment property funds three months of extra wages, super and PAYG withholding, with interest capitalised. The client pays as agreed, and the company repays the loan in full at the end of the contract.

Protecting the tax accounts

The most valuable thing a payroll loan can do is stop the business using tax money to pay wages. Keep GST and PAYG withholding in a separate account, pay them on time, and use the loan for the wage gap. Businesses that avoid creating a tax debt during a cash squeeze come out of it far stronger.

When the gap is not temporary

If the business cannot cover wages in most months, the problem is not timing but margins, pricing or staffing levels. A loan will not fix that. Talk to your accountant about the underlying numbers before borrowing.

Talking to staff and the debtor

If a gap is looming, early, calm communication helps. Most staff will never need to know, because the loan settles before payday. The overdue customer, however, should hear from you: confirm the amount, the agreed terms and when payment is expected, in writing. A documented commitment to pay also strengthens the loan’s exit.

Growing teams and new contracts

Payroll gaps are often a sign of success: a bigger contract, a new site, a second shift. Plan for them before they happen. When you tender for a large job, model the wages you will carry before the first payment and line up funding at the same time. Secured funding arranged in advance is calmer and usually cheaper than funding arranged in a rush the week before payday.

Payroll tax and other obligations

Remember that state payroll tax, workers compensation premiums and leave provisions rise with the wage bill. If a contract pushes the business over a payroll tax threshold for the first time, registration and payments will follow. Include these in the loan amount so the gap is fully covered.

Paying staff on time, every time

A payroll gap is one of the most stressful situations a business owner faces, but it is also one of the most solvable. Tell us the size of the wage bill, how long the gap will last, the property you can offer and what will repay the loan, and a specialist will tell you how quickly funds can be ready. There is no credit check when you first enquire, your information stays with our team, and accurate payroll figures help us size the loan correctly first time. Fund your payroll gap.