In short:
Australian businesses can often still access finance with an ATO debt, particularly when the debt is disclosed, proportionate to the business and being managed through an up-to-date payment plan.
Key facts
- The short answer: Yes, often. A tax debt shrinks your list of lenders but rarely empties it. How you are handling the debt matters more than the debt itself.
- The dividing line: A debt you have declared, on a payment plan you are keeping up with, is workable with many lenders. A hidden debt, or one the ATO is chasing, is a no almost everywhere.
- Why it is urgent: The ATO charges 11.43 percent interest on unpaid tax right now, it grows daily, and since 1 July 2025 that interest is no longer tax deductible.
- What lenders check: How big the debt is next to your turnover, whether you are meeting the payment plan, whether the ATO has taken action, and how the rest of your business looks.
- Where a broker fits: Which lenders accept tax debt, and on what terms, changes month to month. Knowing that list is the broker's job.
A tax debt used to be a quiet problem. Now it is an expensive and visible one. The ATO charges interest well above normal loan rates, that interest can no longer be claimed as a deduction, and the ATO is chasing unpaid debts harder. So the question lands on a lot of desks: we owe the ATO, and we still need money for the business. Can we get it? This guide explains how lenders look at a business carrying tax debt, and what separates a yes from a no.
Why the tax debt itself got more expensive
Two things changed. First, the interest the ATO charges on unpaid tax, called the general interest charge or GIC, is 11.43 percent a year this quarter and grows every day, per the ATO's published rates. Left alone for a year, a $60,000 debt at that rate grows past $67,000. Second, GIC charged from 1 July 2025 onwards can no longer be claimed as a tax deduction, a change the ATO confirms in its official guidance. That removed the tax-time cushion that used to soften the blow. A payment plan does not pause the interest either; GIC keeps building the whole time.
Would clearing that debt with a business loan leave you better off overall? That depends on your situation and on tax rules about what borrowed money is used for, so it is a question for your accountant, not a lender or a broker. What this article can tell you is how the debt affects your chances of getting finance at all.
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How lenders read a tax debt
Lenders do not treat a tax debt as an automatic no. They weigh it up using a few consistent things:
- Did you tell them? A debt declared upfront is a fact to work with. A debt they find in your bank statements is a trust problem, and trust problems end applications.
- Are you managing it? A payment plan met on time is the strongest thing you can show. It turns the debt from an open risk into a bill under control.
- How big is it next to the business? A $30,000 debt in a business turning over $2 million looks very different from the same debt on $300,000 of turnover.
- Has the ATO acted? If the ATO is taking money from your accounts or has sent legal notices, most mainstream lenders are off the table, leaving specialist lenders at higher prices.
- How does the rest look? Strong recent sales, a clean record on your other repayments, and assets behind you can carry a file that includes a managed tax debt.
| Your position | What lenders typically say |
|---|---|
| Debt declared, payment plan on track | Workable with many lenders, including some mainstream ones |
| Debt declared, no plan in place yet | Fewer options; some lenders want a plan first, or the debt cleared at settlement |
| Large debt compared with turnover | Specialist lenders, smaller limits, security more likely needed |
| ATO has started chasing the debt | Specialist-only territory at premium prices, if available at all |
| Debt hidden and found during checks | A no in nearly every case |
A realistic scenario
Picture a Geelong labour hire firm carrying a $70,000 BAS debt from a rough patch last winter. It is on a payment plan with eight months of on-time payments behind it. Sales have recovered, but the plan payments plus the ATO interest are eating the cash needed to take on a new contract.
A bank branch sees the tax debt and stops. A broker sees a bill under control inside a recovering business, and knows which lenders agree. EasyAsset places files like this across more than 50 bank and non-bank lenders, several of which will lend alongside a payment plan that is being met, using the firm's unpaid customer invoices as security through invoice finance, or set up as working capital finance. The difference between a no and a yes here is not the debt. It is knowing which lender will read the file the right way.
What matters most
A tax debt is a problem you manage, not a verdict. Declare it, keep the payment plan on track, let your trading show the recovery, and a real slice of the lending market stays open. The part you cannot see from the outside is which lenders those are this month, and that is exactly the matching a broker does for you. This article is general information only and is not financial or tax advice; decisions about paying out or restructuring tax debt should be made directly with your accountant.
Carrying a tax debt and still need the business funded? Get a cash flow finance quote matched to your position here.
Frequently asked questions
Will a tax debt automatically stop my finance application?
No. Many lenders will approve a business with an ATO debt, especially where it is declared, on a payment plan being met, and small next to turnover. The two things that close most doors are hiding the debt, or the ATO already taking action to recover it.
Does an ATO payment plan hurt my application?
Usually the opposite. A payment plan being met on time is the best proof a lender can see that the debt is under control. The lender counts the plan payments when checking what you can afford, so bring the schedule to the application rather than hoping nobody notices.
Can I use business finance to pay out my ATO debt?
Some lenders will fund a tax debt payout and others will not touch it, so lender choice decides whether this is even an option. Whether a payout actually leaves you better off, including how the new loan is treated for tax, depends on your situation and belongs with your accountant before anything is signed.
Does the ATO keep charging interest while I am on a payment plan?
Yes. The interest keeps building daily on whatever is still owing, for the whole life of the plan, at 11.43 percent a year this quarter, and interest charged since 1 July 2025 cannot be claimed as a deduction. Clearing the debt faster means less interest, which is why the finance question comes up at all.
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