Loans to clear an ATO tax debt

HomeSec funds ATO tax debts from $20,000 to $5,000,000 against property equity, paid directly to the Australian Taxation Office, in as little as 24 hours. Clearing the debt in full stops General Interest Charge accruing, removes the balance from the ATO's business tax debt disclosure pathway, and closes out a Director Penalty Notice before it becomes a personal liability.

The 1 July 2025 change that altered the arithmetic

From 1 July 2025, the ATO’s General Interest Charge and Shortfall Interest Charge are no longer tax deductible. For years, carrying a tax debt was partially subsidised by the deduction on that interest. That subsidy is gone.

Penalties are a separate thing and they never were deductible — a penalty imposed under an Australian law has always been denied under section 26-5. What changed in 2025 is the interest, and the interest is the part that compounds daily on a large balance. At the current 11.43% the ATO is now, in after-tax terms, one of the most expensive creditors a profitable business can have.

The practical consequence: the after-tax cost of leaving money owing to the ATO rose materially overnight, while interest on commercial borrowing used for business purposes generally remains deductible. For a profitable business carrying a large balance, refinancing an ATO debt into commercial credit now compares very differently than it did two years ago.

Why the ATO is no longer a patient creditor

• Debt disclosure. The ATO can report a business tax debt to credit reporting bureaus where the business has an ABN, owes $100,000 or more overdue by more than 90 days, and is not effectively engaging with the ATO about it. Twenty-eight days' written notice is given first. Keeping a payment plan current, or having an objection or a hardship application on foot, is what "effectively engaging" means — and it is the whole reason a defaulted arrangement is more dangerous than the debt itself. Once reported, the balance is visible to every lender, supplier and insurer who searches you.
• Director Penalty Notices. A DPN can make directors personally liable for unpaid PAYG withholding, GST and superannuation. Lockdown DPNs cannot be remitted by appointing an administrator. The response window is short and unforgiving.
• Garnishee notices. The ATO can require your bank or your debtors to pay it directly, without a court order.
• Payment plan defaults. A single missed instalment can terminate the arrangement and reinstate the full balance.

Which of these is actually happening to you?

"ATO debt" covers five quite different problems with five different clocks on them. The pages below deal with each one specifically — what the deadline really is, what the exposure is, and what funding does and does not fix.

Can I get a loan if I already have an ATO debt?

Yes. An outstanding ATO balance is one of the most common reasons a business owner is here, and it is not a reason for us to decline. We do not require tax returns, BAS lodgement to be current, or a clean credit file. We lend against property equity and a credible exit.

This is exactly where a private lender and a bank diverge. A bank sees an ATO debt as an adverse credit event and generally stops. We see it as the problem the loan exists to solve.

A payment plan is not the end of the problem

Most people who ring us about a tax debt are already on an arrangement, and treat it as solved. It is not solved, it is scheduled — and two things about it are worth knowing before you rely on it.

It is unforgiving. Miss one instalment and the arrangement can be cancelled, at which point the whole balance is payable again and you are back in active collection rather than in a plan. The ATO is not obliged to give you another one, and the second arrangement is harder to get than the first. See what happens when a plan defaults.

Other lenders can see it, and most of them care. A current arrangement does protect you from having the debt reported to credit bureaus — that protection is the whole point of engaging. But it does not make the debt invisible. Any lender running a serviceability assessment asks for an ATO integrated client account statement or reads the direct debits in your bank statements, and a tax arrangement in either place reads as committed cash flow and an unpaid liability. For a good many lenders it is where the application stops.

Clearing the balance removes both problems at once: nothing left to default on, and nothing on the account for the next lender to find. That is the argument for paying it out rather than paying it down, and it is a stronger one since the interest stopped being deductible.

How the payment actually works

Funds are remitted directly to your ATO account using your payment reference number, rather than passing through your business account first. That matters for two reasons: the balance clears and the interest stops on the day of settlement rather than whenever a transfer happens to be made, and there is no window in which the money is available to be spent on something else.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager