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ATO and tax debt

Can I get finance with an ATO payment plan in default?

Updated Sept 2026 · Reviewed by The Lienhouse team

Yes, where there is property equity. A defaulted payment plan cancels the arrangement, makes the full debt due and puts the ATO back on the enforcement path, so banks will not lend. Asset-secured lenders will, because paying the ATO out removes the problem. The ATO is also far less willing to grant a second plan after a default, which is why paying out is usually the better route.

Key takeaway
A defaulted ATO plan makes the whole debt due and restarts enforcement; asset-secured funding against property can pay it out in full, which a second payment plan usually cannot match.

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Payment plans default for ordinary reasons: a slow quarter, a customer who paid late, a new BAS that could not be paid on top of the instalment. The ATO’s system does not distinguish. A missed instalment, or a failure to lodge and pay new obligations on time, ends the plan.

What a default triggers

  • The arrangement is cancelled and the whole debt is due now.
  • General interest charge, 11.43% a year for July to September 2026 and not deductible, continues on the full balance.
  • The account moves back into firmer action: garnishee notices, director penalty notices, a notice of intent to disclose to credit bureaus, a statutory demand.
  • Future payment plan requests are assessed against the history of default.

Why a lender will still help

An asset-secured lender’s concern is whether the ATO’s enforcement could compete with its security. If the loan pays the ATO out, that concern disappears at settlement. So the defaulted plan is not a reason to decline. It is the reason for the loan. The lender will want a current running balance statement and will pay the ATO directly.

Pay out, or try for a second plan

A second plan, if granted, typically needs a significant upfront payment and a shorter term, and interest keeps running throughout. One more missed payment ends it, with less goodwill left.

Paying out ends the ATO relationship on that debt. The cost becomes a known rate over a known term, the interest is generally deductible, and enforcement risk is gone. The after-tax comparison is in loan interest vs ATO GIC.

A hybrid is common where equity does not cover everything: borrow what the property supports, pay that as a lump sum, and negotiate a plan for the remainder from a much stronger position.

Fix the cause, not only the debt

A lender will ask, and the borrower should ask, why the plan failed. If current BAS and super cannot be paid on time alongside the instalment, refinancing the old debt solves the past but not the present. Work through the cash flow with your accountant. If the business cannot meet its ongoing tax obligations after the old debt is cleared, a small business restructuring may be the better path - see funding a small business restructuring plan.

Which product

For speed, a caveat loan. For a term that matches a realistic refinance, a second mortgage over 12 to 24 months.

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FAQ

What happens when an ATO payment plan defaults?

The plan is cancelled, the full balance becomes payable, general interest charge continues, and the ATO can move to garnishees, director penalty notices, statutory demands or credit reporting.

Will the ATO give me another plan?

Sometimes, but usually on tougher terms: a larger upfront payment, a shorter period and sometimes security. Repeated defaults make refusal likely.

How quickly should I act?

Immediately. The period between default and the ATO's next step is when finance is easiest to arrange and negotiation is still possible.

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Plan defaulted? Tell us the balance and the asset.

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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