Quick answer
When a tax bill is bigger than your cash, the two main routes are an ATO payment plan or clearing the debt with business finance. Payment plans suit manageable debts you can repay from cash flow; businesses owing $200,000 or less can often set one up online. A business loan suits when you'd rather clear the ATO in one go. ATO debt is considered case by case, and property security helps with larger amounts.
Key points
- Lodge on time even if you can't pay — it keeps every option open.
- Businesses owing $200,000 or less can often set up an ATO payment plan online.
- A loan can clear the ATO in one go and replace it with one planned repayment.
- ATO debt is considered case by case, not an automatic barrier.
- ATO online payment plans
- Debts of $200,000 or less
- ATO debt
- Considered case by case
- Property-secured
- $20k – $5m
Few envelopes make a business owner’s stomach drop like one from the ATO. Maybe your accountant has just finalised the return and the number is bigger than expected. Maybe a few BAS quarters slipped during a busy or difficult year. Either way, the question is the same: what’s the smartest way to deal with it?
Let’s look at your options side by side, calmly.
First things first: keep lodging
Before anything else — keep lodging your BAS and tax returns on time, even if you can’t pay the full amount. Lodging and paying are two separate obligations. Staying on top of lodgements:
- keeps your record clean,
- shows the ATO you’re engaging,
- and makes every funding option easier later.
The ATO publishes due dates for lodging and paying your BAS; diarise them.
Payment plan or business loan — what’s the difference?
| ATO payment plan | Business loan to clear the debt | |
|---|---|---|
| How it works | You repay the ATO in instalments | The loan pays the ATO; you repay the lender |
| Setting it up | Online for debts of $200,000 or less in many cases | Enquiry, assessment, documents |
| Suits | Manageable debts, steady cash flow | Larger debts, wanting a clean slate, bundling other pressures |
| Watch for | Keeping up with the plan alongside new tax as it falls due | The total cost of the loan; security if property-backed |
Neither is automatically better. The right answer depends on the size of the debt, your cash flow, what else you owe and how you’d feel carrying each option.
When does a business loan make sense for ATO debt?
A loan can be the right move when:
- You want a clean slate. Clearing the ATO in one go and replacing it with one planned repayment gives certainty.
- You’re juggling several pressures. Tax debt plus supplier arrears plus short-term advances can sometimes be rolled into one facility.
- A payment plan isn’t working. If instalments plus new tax are too much, restructuring can help.
- You have property. Property-secured loans from $20,000 to $5,000,000 can clear larger debts, and security helps where credit is bruised.
ATO debt is considered case by case — we talk with business owners about it all the time. If you’d like to explore it, start a quick, no-credit-check enquiry.
What will a lender want to know?
- A current ATO statement of account showing exactly what’s owed.
- Whether lodgements are up to date. Outstanding lodgements are usually the first thing to fix.
- Any existing payment plan and how it’s been going.
- Why the debt built up — a short, honest explanation.
- What’s changed so it doesn’t happen again, such as a separate tax savings account.
- Your bank statements and, if relevant, property details.
Our guide to explaining your business to a lender helps you put this into a few clear sentences.
How do you stop it happening again?
Clearing a tax debt is only half the job. The other half is making sure next year looks different:
- Open a separate tax account. Move GST and PAYG withheld into it every time money comes in.
- Know your BAS cycle. If quarterly feels too lumpy, monthly reporting can make amounts more manageable.
- Get PAYG instalments right. Talk to your accountant if yours don’t match how the business is trading.
- Forecast tax in your cash flow. Our cash runway guide shows how to build it in.
- Check in with your accountant before EOFY, not after.
An illustrative example
Illustrative only. A small building company had its best-ever year, but the owners didn’t set aside enough for tax. Their accountant has calculated an income tax bill that lands at the same time as a quarterly BAS. Together, the amount is well beyond their cash on hand.
They’re weighing up a payment plan against a property-secured loan over the director’s home. Their funding plan shows both routes, with a coach’s note to lodge the BAS on time regardless. Because they also carry two short-term equipment advances, the loan option could clear the ATO and the advances together, leaving one repayment.
Is it good debt to borrow for tax?
Borrowing to pay tax doesn’t create new income, so it’s not “growth” debt. But it can still be the right move if it reduces pressure, protects the business and replaces an uncertain situation with a planned one. Our good debt vs bad debt guide has a quick test for thinking it through.
What if the bill is from a prior year?
Older tax debts can feel harder to tackle, especially if they’ve been building quietly with interest charges. Start by getting a current ATO statement of account so you know the exact figure, lodge anything outstanding, and then compare your options with fresh eyes. An old debt with lodgements now up to date reads very differently to a lender from one with returns still missing.
Tax bill on your mind? Let’s find a way through it
Tax debt is one of the most common reasons business owners contact us, and we don’t shy away from it. We’ll help you compare your options honestly and find the path that suits your business.
Starting takes about a minute and involves no credit check. Your details aren’t circulated to a pile of lenders; a real person reads your situation and calls you. Please be upfront on the form about how much is owed and whether lodgements are current — it’s the quickest way to the right fit.
Frequently asked questions
Can I get a business loan to pay my tax bill?
Often, yes. Paying a tax bill or clearing ATO debt is a legitimate business purpose, and it's one of the most common reasons owners get in touch. Each situation is considered case by case.
Is an ATO payment plan better than a loan?
It depends. A payment plan can suit a manageable debt you can repay from cash flow. A loan can suit when you'd rather clear the ATO in one go, consolidate several pressures or you're finding the plan hard to keep up with. Compare both honestly.
Can I set up an ATO payment plan myself?
The ATO says that if you owe $200,000 or less, you may be able to set up a payment plan through its online services. Larger debts usually need a conversation with the ATO.
Will ATO debt stop me getting finance?
Not automatically. It's considered case by case. Being upfront about the amount, having a current ATO statement of account and keeping lodgements up to date all help.
What should I do first if I can't pay my BAS?
Lodge it on time anyway, then contact the ATO or your tax agent about your options. Ignoring it makes everything harder. Then look at whether a payment plan or funding suits your situation.