ATO debt and no property: how unsecured lenders look at tax arrears

Does ATO debt stop you getting unsecured finance?

Not on its own. ATO debt is considered case by case. Plenty of sound businesses fall behind with the tax office after a big growth year, a slow season or a large customer paying late. What lenders want to know is whether the debt is being managed and whether the business can carry both the ATO and a new facility.

Without property, the lender can’t lean on an asset to offset the risk, so how you’re handling the ATO becomes a big part of the story.

What do lenders want to see about ATO debt?

Situation	How it tends to read
BAS lodged, payment plan agreed and being met	Manageable; often fundable
BAS lodged, balance owing, no plan yet	A question mark; a plan or funding purpose needed
BAS not lodged	A serious concern; lodge first
Debt reported to credit bureaus	Harder; some lenders still consider it
Director penalty notice issued	Urgent; limited time to act

The ATO’s own message is consistent: get the return in by the due date whatever your bank balance, and call early. Lenders read lodgement status the same way. A lodged BAS with an unpaid balance shows the business knows where it stands.

When can the ATO report a business tax debt?

The ATO can disclose business tax debt information to credit reporting bureaus when all of these apply:

• the business holds an ABN and isn’t in an excluded category;
• $100,000 or more of its tax debt has been overdue for over 90 days;
• it hasn’t engaged with the ATO about managing what’s owed;
• there’s no live Tax Ombudsman complaint about the ATO’s intention to report.

If you have a payment plan and are complying with it, the ATO won’t report the debt. That alone makes a payment plan worth serious consideration, because a reported debt changes how lenders read your credit file.

Payment plan or loan: which is better?

For balances up to $200,000, the ATO lets many businesses arrange instalments themselves in online services. Interest charges continue to accrue on the balance, and the ATO confirms those interest charges are no longer tax-deductible when incurred on or after 1 July 2025. That change made the true cost of carrying ATO debt higher than many owners assume.

A loan can make sense when:

• the debt is approaching the reporting threshold and a plan isn’t possible or practical;
• the business needs a clean slate with the ATO before tendering or renewing contracts;
• a director penalty notice has been issued;
• the total cost of a facility compares well with continuing ATO interest.

A payment plan can make more sense when the balance is modest, the business can meet instalments comfortably and there’s no urgency. Our page on BAS and tax bills walks through the comparison.

If you’d like a second opinion on your ATO position, send a quick enquiry and a specialist will talk it through.

What about director penalty notices?

A director penalty notice, or DPN, is how the ATO can make directors personally liable for certain unpaid company amounts: PAYG withholding, GST and the super guarantee charge. The ATO explains that directors have 21 days to take one of the options set out in the notice.

A DPN is a moment for your accountant or adviser first. Funding may be part of the response, but the options and consequences depend on the type of notice and your circumstances. Don’t sit on it.

How do you present ATO debt in an application?

1. Lodge everything that’s due before applying.
2. Get a current ATO statement showing the balance and any plan.
3. Show plan payments being met in your bank statements.
4. Explain the cause in a sentence or two: a growth year, a customer default, a one-off event.
5. Show the fix, such as a weekly tax set-aside account. Our guide to a BAS set-aside plan explains how.

A worked example (illustrative)

A concreting company with no property has an ATO balance of about $85,000 after a big year of growth. BAS is lodged, and it has been meeting a payment plan for four months. Deposits average about $150,000 a month.

An unsecured lender could reasonably see this as a managed debt in a growing business. Whether to refinance the ATO with a loan or keep paying the plan would come down to cost, cash flow and whether a clean ATO position is needed for upcoming tenders.

What’s the order of operations if you owe the ATO?

When tax debt and funding needs collide, sequence matters:

1. Lodge every outstanding BAS and return.
2. Contact the ATO and understand your options, including a payment plan.
3. Get advice from your accountant, especially if a DPN is involved.
4. Compare costs of a plan versus a facility, including the non-deductibility of ATO interest charges.
5. Fix the cause with a weekly tax set-aside so the debt doesn’t rebuild.

Following that order puts you in the strongest position with both the ATO and any lender you approach.

Tax debt? Talk to someone who won’t flinch.

ATO debt is common and fixable. Tell us where things stand. Asking costs you nothing on your credit file, your details aren’t passed around a panel of lenders, and a real person looks at your ATO position alongside your trading.

Please give accurate figures for the ATO balance and any payment plan on the form. Straight numbers mean a straight answer on the first call. See if you qualify.