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Caveat loans

Can I get a caveat loan with an ATO debt?

Updated Sept 2026 · Reviewed by The Lienhouse team

Yes. An ATO debt does not rule out a caveat loan, and paying one out is among the most common reasons companies and trusts take one. Lenders look at the equity in the property and the exit, not at whether the tax account is clean. Most will want the ATO paid directly from the settlement.

Key takeaway
An ATO debt is not a barrier to a caveat loan - it is often the purpose - provided there is equity in the property, a credible exit and, usually, the ATO is paid directly at settlement.

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Banks treat an unpaid tax debt as a reason to decline. Private, asset-secured lenders treat it as a problem to be solved. The difference is the assessment basis: a caveat loan is judged on the property and the exit, so a tax debt is simply the use of funds.

Why lenders are comfortable

The risk a lender worries about is not that tax is owed. It is that the ATO takes action that competes with the lender’s security - a garnishee, a statutory demand, a winding-up application. Paying the ATO out at settlement removes that risk on day one. That is why most lenders insist the ATO is paid directly from the loan, not by the borrower afterwards. See will the lender pay the ATO directly.

What they check

  • The title. Who owns the property, what is owed on the first mortgage, and whether anything else is registered.
  • The ATO balance. A current statement, so the payout clears the whole debt including general interest charge to the settlement date.
  • Lodgements. Outstanding BAS or returns mean the true debt is unknown. Bringing lodgements up to date first makes the file far stronger.
  • The exit. How the caveat loan is repaid: a refinance once the tax debt is gone, a sale, or funds coming in.

Why speed matters here

General interest charge is 11.43% a year for July to September 2026, compounds daily and has not been tax deductible since 1 July 2025. Once a debt of $100,000 or more is over 90 days overdue and the business is not engaging, the ATO can report it to credit bureaus. Director penalty notices carry a 21-day clock. A caveat loan that settles in days stops all of those running. The cost comparison is set out in loan interest vs ATO GIC.

When it is the wrong answer

Where there is no real equity, where the business cannot repay or refinance the new loan, or where the tax debt is a symptom of a business that is no longer viable. In those cases the first call is your accountant, and possibly a restructuring practitioner, not a lender. The full picture for tax debt is on the ATO tax debt funding page.

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FAQ

Does the ATO debt need to be on a payment plan first?

No. A caveat loan can pay the debt out in full whether or not a plan exists. If a plan is in place and current, that is a positive, not a requirement.

Will the lender check my ATO account?

Usually yes. Expect to provide a running balance or integrated client account statement so the payout figure is accurate and nothing is left outstanding that could later rank against the property.

Can the loan cover more than the ATO debt?

Yes, within the LVR. It is common to clear the ATO and leave a working capital buffer, as long as the exit repays the full amount.

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Clear the ATO against your property.

The amount, the asset and the timeframe. We’ll match you with a funder and email you their introduction. Reply to it and they’ll be in touch.

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