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An ATO payment plan is an arrangement to pay a tax debt by instalments. It stops most recovery action while it is honoured. It does not stop interest. Both facts matter when a business on a plan needs finance.
How lenders see a plan
A plan that is current is a good sign: lodgements are up to date, the ATO has accepted the proposal, and the debt is known. The lender will ask for the plan letter and the running balance. A plan in arrears is a different matter, covered in finance with a defaulted ATO payment plan.
Leave it or pay it out
Leaving the plan makes sense where the debt is small, the instalments are comfortable and the loan is for something unrelated, like a settlement bridge, that will be repaid in weeks.
Paying it out makes sense more often than it used to. General interest charge is 11.43% a year and, since 1 July 2025, is not tax deductible. Interest on a business-purpose loan generally is. For a company paying tax at 25%, non-deductible interest at 11.43% costs the same as deductible interest at about 15.2%. Paying out also ends the risk that one missed instalment collapses the plan and restarts enforcement. The comparison is worked through in loan interest vs ATO GIC.
What changes at settlement
If the ATO is being paid out, the lender will normally pay it directly from the loan and want confirmation of the final balance. The plan ends because the debt is gone. If the plan stays, the lender may include a condition that it is kept current for the life of the loan.
Think about the exit
A caveat loan is short. If it pays out a two-year payment plan, something has to repay the caveat loan in a few months: a refinance, a sale, funds coming in. Where the realistic answer is a longer term, a second mortgage over 12 to 24 months is the better structure, at a lower monthly rate. Run the after-tax numbers with your accountant before deciding. The broader position is on the ATO tax debt funding page.
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Get matched with a funderFAQ
Do I have to pay out the ATO to get the loan?
Not always. If the plan is current and the debt is modest relative to the equity, some lenders will leave it. Larger debts or plans in arrears are usually required to be cleared at settlement.
Does interest keep running on a payment plan?
Yes. General interest charge accrues on the outstanding balance for the life of the plan, at 11.43% a year for July to September 2026, compounding daily.
What if I default on the plan after the loan settles?
The ATO can resume recovery action, which may compete with the lender's security. It is likely to be a default under the loan as well.