Combining an ATO payment plan with a business loan

Most advice treats tax debt as an either-or: set up a plan with the ATO, or borrow to pay it out. In practice the strongest solution is often both, used for different jobs. The plan gives time; the loan removes pressure where it’s sharpest. Getting the split right is what keeps the business trading and the ATO onside.

How can a plan and a loan work together?

There are three common combinations.

Combination	How it works	Suits
Loan first, plan for the rest	Borrow to pay down the debt, then put the smaller remainder on a plan	Large debts where the full amount won’t fit a plan
Plan first, loan to pay out later	Stabilise with a plan now, then refinance it once property or trading allows	Businesses that need breathing room before they can borrow well
Loan for one tax type, plan for another	Clear the parts with the hardest consequences, plan the rest	Mixed debts across income tax, GST and withheld amounts

Each is legitimate. The right one depends on how big the debt is, which parts carry the most risk, and what cash flow can support.

What has changed with ATO debt recently?

Two facts matter for the maths.

Interest is no longer deductible. According to the ATO, taxpayers can no longer claim a deduction for ATO interest charges (GIC and SIC) incurred on or after 1 July 2025. Carrying tax debt now costs more after tax than it used to, which tilts the comparison towards clearing it sooner where funding is available.

Online plans have a ceiling. The ATO’s guidance, updated in October 2026, says businesses owing $200,000 or less may be able to set up a plan online or via the self-help line. Larger debts, plans longer than two years, recent firmer-action warnings, or two or more defaulted plans in the last 12 months all mean phoning the ATO instead.

A loan that brings the balance under the online threshold, or shortens the time needed, can make a plan much easier to agree.

Who does the combination suit?

• Businesses with tax debt that are trading profitably now and have lodgements up to date, or can bring them up to date quickly.
• Owners whose debt is too big for a plan alone, or whose plan instalments are crowding out wages and suppliers.
• Files with property equity, or with steady bank-statement deposits for an unsecured loan.

If lodgements are behind, fix that first. The ATO advises lodging on time even when you can’t pay. Lenders treat unlodged returns as a bigger warning sign than the debt itself.

Weighing up the split for your own tax debt? Get a specialist’s view without any credit check.

What does the combination look like with real-world numbers?

An illustrative example, with invented figures. A civil contracting company owes the ATO $310,000 across activity statements and an income tax assessment. Its lodgements are current. At that size, the business can’t use the online plan option and would need to phone the ATO, and the instalments it can afford would stretch the debt well beyond two years.

The director owns an investment property with equity. A specialist lender advances $180,000 secured over it and pays the ATO directly at settlement. The remaining $130,000 now falls within the online plan range, and the company sets up instalments it can carry alongside the loan repayment. Twelve months later, with both being paid on time and a profitable year lodged, the company approaches a bank to refinance the property loan and pay out what’s left of the plan.

Three things made it work: lodgements were current before anyone asked for money, the loan targeted the portion that made a plan unworkable, and both repayments were modelled together before signing. Change any of those and the answer shifts.

What will the lender ask for?

• An ATO statement of account, showing each debt type and balance.
• Details of any current payment plan, including instalments and whether it’s been kept.
• Lodgement status for BAS and income tax returns.
• Business bank statements to confirm cash flow supports both the plan and the loan.
• Property details, if using security.
• An accountant’s note confirming the position, which can speed things up. See what an accountant’s letter should say.

Lenders often pay the ATO directly at settlement, so the reduction shows up straight away in the account.

What are the risks?

Doubling up repayments. If you keep a plan and add a loan, both must be paid. Model the combined monthly outflow before committing.

Defaulting the plan. A defaulted ATO plan makes the next one harder to get and worries lenders. If a loan is meant to pay out the plan, time it so the plan doesn’t lapse while you wait for settlement.

Securing tax debt against property. Paying the ATO with a property-secured loan turns an unsecured tax debt into secured debt. That’s often worthwhile, but it’s a real trade.

How does it end?

Ideally with both gone: the plan paid out by trading or a refinance, and the loan repaid through improved cash flow or a cheaper lender once the file is clean. Our trading exit page shows how lenders test whether repayment from cash flow is realistic.

Want help choosing the split?

If tax debt is the thing holding everything else up, the combination route is often the most practical way through. An enquiry doesn’t involve a credit check, your file isn’t handed around to a list of lenders, and a specialist calls to talk through which part the loan should handle. Please give accurate figures for the ATO balance and any current plan; that’s how we design a split that both the ATO and a lender will accept. Talk to us about your tax debt.