ATO tax debt funding

When the ATO starts to move

The ATO has returned to active debt collection. Once a business tax debt of $100,000 or more is overdue by more than 90 days and you aren’t engaging, the ATO can issue a Notice of Intent to Disclose - and report the debt to credit reporting bureaus about 28 days later, where it sits on your file and can affect both new finance and trade credit. Firmer steps follow from there: garnishee notices, Director Penalty Notices, statutory demands. General interest charge (GIC) compounds daily on the balance the whole time - 11.43% p.a. for the July-September 2026 quarter, rising to 11.51% for October-December - and it keeps running even while you’re on a payment plan.

Why clearing it can cost less than carrying it

Since 1 July 2025, GIC is no longer income-tax deductible. Interest on a commercial, business-purpose facility generally still is. So paying the ATO out and refinancing the balance into a fixed-term loan can be cheaper after tax than letting non-deductible GIC compound - and it swaps an open-ended cost for a known rate and a clear end date. The figures here are indicative and current as at June 2026; confirm the after-tax position with your accountant.

How property clears the debt

If your company or trust owns property with equity, you can usually raise the amount owing against it - by a caveat loan or a second mortgage - without disturbing your existing first mortgage. The funds pay the ATO directly, you drop below the disclosure threshold, and recovery action stops once the debt is cleared. Most of these are assessed on the property and a credible exit rather than full financials, which is why they settle quickly. Subject to assessment.

Which lenders will refinance an ATO debt against property?

Banks generally treat an outstanding ATO debt as a problem to be fixed before they lend, not a purpose they will fund. Once a payment plan has defaulted or the debt has been reported, a bank refinance usually stalls until the debt is cleared, which is the circular position most directors find themselves in. Private lenders and non-bank commercial lenders assess the property and the exit, so an ATO debt is simply the stated purpose of the loan. What they need is set out in what lenders need to know about an ATO debt.

There are three ways the refinance is usually structured:

• A caveat loan where the debt has to be paid in days, typically on a short term, with the funder paying the ATO directly at settlement.
• A second mortgage behind your existing bank loan, over a longer term, where the amount is larger or you want more time before the exit.
• A first mortgage refinance where the existing facility is being replaced anyway, so the ATO balance is folded into one new loan.

If the ATO debt sits alongside other business debts, it can be consolidated with them into a single facility secured on the property, with one rate and one end date; see debt consolidation. A defaulted payment plan or a debt already on your credit file does not rule this out, but it changes what the funder wants to see: read finance with a defaulted ATO payment plan and getting a loan after ATO credit reporting before you enquire.

What we’ll need

The amount owing (an ATO statement or running balance), the property and its current first-mortgage position, and your exit - a refinance, a sale, or funds coming in. That’s usually enough to confirm terms.