Loans for tax debt are business loans that exist to clear an overdue ATO balance. You borrow from a private or non-bank lender, the proceeds go to the ATO, and the tax debt is replaced by a loan with a defined term and exit. This page walks through how that loan is set up, what it needs, and how to judge whether it is the right tool.
For the wider choice between loans, plans and doing nothing, start with our tax debt loans overview. Here we stay with the loan itself.
How do loans for tax debt actually work?
A loan to pay an ATO debt works in five movements: you establish the balance, the lender assesses the file, you sign, the lender pays the ATO, and you repay the lender instead of the ATO.
What changes for you is the counterparty. The ATO adds general interest charge (GIC) to overdue amounts, compounds it daily and reviews the rate every quarter. A private or unsecured lender instead charges a price agreed up front for the term. Which one costs less depends on how long you need and what the loan is priced at for your circumstances. Fast private money costs more than a bank loan, so it is for when speed or flexibility is worth the difference.
How is the ATO paid, and when do funds move?
The ATO is paid directly from the loan proceeds, using the payment details on your ATO account. That is usually done at settlement or on the day documents are returned, once the lender is satisfied the loan is signed and any security is in place.
Timing depends on the structure:
| Structure | What has to happen first | Typical pace |
|---|---|---|
| Caveat loan | Signed loan agreement; caveat lodged on title | Fastest private option; can be within 24 hours in some approved scenarios |
| Second mortgage | Signed mortgage; existing lender’s processes | Often a few business days |
| First mortgage (private) | Refinance out of existing lender; discharge steps | Several business days to a few weeks |
| Unsecured loan | Bank statements reviewed; contract signed | Often a few business days |
Tell the lender the date the debt must be cleared by. If there is a notice period, a threatened step or a credit-reporting date, say so at the start so the file is built around it.
Should the loan be secured on property or unsecured?
Secure it on property if the debt is large or urgent, and go unsecured if you have no property and a steady trading record. The two behave very differently.
Property-secured loans commonly run from $20,000 to $5,000,000 against residential or commercial security. The assessment rests on equity, the status of any existing mortgage and the exit. Private mortgage options may not need business cash-flow records at the first assessment, which is why they suit owners whose lodgments have slipped. Equity is assessed from the property details and your own estimate of what the property is worth.
Unsecured loans commonly run from $5,000 to $500,000 and are sized on turnover and bank statements. There is no property to register, so they are simpler on paper, but the lender needs to see consistent deposits and manageable existing commitments.
If you are choosing, read secured versus unsecured business loans first. For the property route in detail, see fast second mortgages and caveat loans.
What do lenders look at on a tax debt file?
Lenders look at five things, in this order of weight.
- The payout figure. What the ATO says is owing, ideally dated within the last week.
- The security or the deposits. Equity in property, or bank statements that show turnover.
- The exit. How the lender gets repaid and when.
- Who owns what. The name on the title, the director guarantees, and whether anyone else needs to sign.
- Whether the problem will repeat. A lender wants to hear that future BAS and instalments are being set aside.
The fifth point is the one borrowers skip. If the same shortfall will happen again next quarter, a one-off loan only buys time. Say how you will stop it, whether by a separate tax account, a changed payment cycle or a lower cost base.
Can you borrow with bad credit or a history of late lodgments?
Yes, it can be possible, because tax debts are the sort of problem security-led lenders see often. A default, a bank decline or earlier ATO debt does not end the discussion. It shifts the weight to the equity, the exit and the paperwork.
Overdue lodgments are different. Where statements are unlodged, the true balance is unknown, and neither a lender nor the ATO can work with a number that may change. If you have BAS outstanding, lodge it first, or lodge it in parallel, and tell us at the outset. See bad credit business loans for how this is assessed.
What is a good exit for a tax debt loan?
A good exit is a specific event with a date that repays the loan in full. Lenders accept a short list.
- A tax refund or GST credit that has been lodged and is in process.
- A large invoice or progress claim that is approved but unpaid.
- Sale of an asset, a property or part of the business.
- Refinance to a bank once lodgments are current and the account is clean.
- A contract win or settlement with paperwork behind it.
“Trading will improve” is not an exit. If it is the only one you have, a payment plan may suit better. Our exit strategy guide shows how to present one.
Illustrative example: clearing a GST and PAYG backlog
Illustrative example: a transport company owes the ATO $220,000 across two years of GST and PAYG withholding. It has lodged everything, trades profitably and owns a depot with a bank mortgage and healthy equity. The ATO has issued a notice about firmer action, and a payment plan on this size of debt would need a phone call and a long schedule.
The company arranges a $240,000 second mortgage over the depot. The lender pays the ATO’s figure of $220,000 on the agreed date. The rest covers the loan’s costs and a buffer. The company sets aside GST weekly into a separate account and refinances the second mortgage into a bank loan after four quarters of on-time lodgments.
Ready to move?
If the figures above look like yours, put them in one application. The quick application takes a few minutes and asks for the amount, the property if there is one, the ATO balance and the exit. Apply for tax debt funding and we will tell you which structure fits and what the lender needs next.
What costs should you expect around the loan?
Expect the price of the loan itself plus the usual set-up items: lender and broker fees, legal costs for a mortgage, and any registration charges where security is taken over property. Interest on short-term property loans can often be prepaid or added to the loan, which keeps your cash free in the first months.
Pricing is individual, set on your circumstances and the strength of the security and exit, so we do not publish numbers. Ask for the total cost over the term you expect, not just the headline price. Our guide to business loan interest rates and fees shows how to compare.
When is a loan the wrong move?
A loan is the wrong move when you cannot see how it gets repaid, or when a plan would do the same job more cheaply. Examples:
- The debt is small and you can pay it from cash flow in a few months.
- Your lodgments are current and the business qualifies for an ATO payment plan you can comfortably keep.
- The shortfall is structural, for instance every quarter’s GST is spent before it is due, and nothing about the business changes.
In those cases, the payment plan versus business loan guide is the better next read. If the debt is GST, PAYG or super, loans to pay BAS, GST and PAYG debt covers each obligation.
Start with one application
A loan to clear a tax debt works best when you decide quickly and bring the right numbers. Have your ATO balance, the address of any security property, your last few bank statements and a two-sentence exit. Send the application or call 03 4059 1829 and we will help match you with a path that fits the debt and the deadline.