Tax and ATO
Using business finance to pay ATO debt: what to know in 2026
Since 1 July 2025, ATO interest charges are no longer tax deductible. Here is how businesses weigh a payment plan against refinancing tax debt with a lender.
- Reviewed by
- Kama Atcheson, Business lending specialist
- Published
- Last reviewed
- Reading time
- 6 min read
Key takeaways
- General interest charge (GIC) and shortfall interest charge (SIC) are not deductible for income years starting on or after 1 July 2025.
- Options include an ATO payment plan, an unsecured tax loan or a property-secured loan.
- Lenders want to know the size and age of the debt, lodgement status and whether a plan is being met.
- Always compare the after-tax cost of GIC with the full cost of the loan.
Tax debt is one of the most common reasons Australian businesses look for finance. BAS, PAYG withholding and income tax can build up quickly when cash flow is tight, and once the ATO starts charging interest and escalating recovery, the cost and stress rise.
What changed on 1 July 2025
The ATO charges the general interest charge (GIC) on overdue amounts and the shortfall interest charge (SIC) on amended assessments. Historically businesses could claim a tax deduction for these charges. For income years starting on or after 1 July 2025, GIC and SIC are no longer deductible.
That means carrying an ATO debt now costs more after tax than it used to, which has changed the calculation for many businesses weighing a payment plan against refinancing.
Your main options
1. An ATO payment plan
The ATO may agree to a plan that spreads the debt over time. GIC generally continues to accrue on the outstanding balance. Plans suit businesses that can meet regular instalments and keep lodgements up to date.
2. An unsecured tax loan
Some cashflow lenders list tax debt as an eligible loan purpose. Approval depends mainly on your trading performance. These loans can be fast, but limits are linked to turnover and pricing reflects the unsecured risk.
3. A property-secured or private loan
For larger debts, or where financials are behind because of the tax issue, lenders that focus on property security can pay the ATO out in one go. Pricing and terms depend on the security, the amount and the exit strategy.
What lenders look at
- Size and age of the debt, and what it is made up of
- Lodgement status. Many lenders want all lodgements up to date
- Payment plan history, including whether instalments have been met
- Trading performance since the debt built up
- Security available and existing debts
Be upfront. Lenders will usually find an ATO debt during assessment, and an undisclosed debt can end an application that might otherwise have been approved.
Comparing the cost
Compare like with like. Work out what the ATO debt will cost over your expected payback period at the current GIC rate, remembering it is no longer deductible, then compare that with the total cost of the loan, including fees. Our repayment calculator helps with the loan side, and your accountant can help with the tax side.
Next steps
Compare tax and ATO finance options, or tell us about the debt and we will look for lenders that suit your situation.
Questions about this topic
Can I get a business loan if I already owe the ATO?
Often, yes. Some lenders will lend alongside an ATO payment plan that is being met, while others lend specifically to pay the debt out.
Is it better to use a payment plan or a loan?
It depends on the size of the debt, the current GIC rate, your cash flow and the cost of the loan. Compare the total cost of each and speak to your accountant.
What is the current GIC rate?
The ATO publishes the GIC rate each quarter on its website. Check the current rate before comparing it with a loan.
