ATO debt loans: paying a business tax debt with a short-term property loan

When the tax bill has outgrown the business’s bank balance, there are really only two roads. You stretch the debt over time with the ATO, or you clear it in one payment with money borrowed against property and then repay that loan from a sale, a refinance or incoming cash. This page is about the second road: which short-term structure to use, how fast each one moves, and what makes a lender say yes.

Why would an owner borrow against property to pay the ATO?

Because the ATO’s tools get firmer the longer a balance sits there, and three of them are worth knowing about before you decide.

• The interest keeps compounding. The ATO says tax debts on a payment plan “continue to accrue GIC, which compounds daily”. A plan stops the phone calls; it does not stop the meter.
• It’s no longer deductible. Any general interest charge incurred on or after 1 July 2025 can’t be claimed as a tax deduction, even when the debt relates to an earlier year. The ATO’s own reminder about the change suggests talking to your accountant or finance provider about “alternative methods of funding payment of tax debts”.
• Your credit profile is on the line. The ATO can report a business’s tax debt to credit reporting bureaus when the business has an ABN, at least $100,000 has been overdue for more than 90 days and it isn’t engaging with the ATO to manage the debt. A written notice gives 28 days to act first.

For companies there’s a fourth. Unpaid PAYG withholding, GST and super guarantee charge can become a personal director penalty. If those amounts weren’t reported within three months of their due date, the ATO says the penalty can only be remitted by paying the company’s debt in full.

Which short-term structure suits an ATO debt?

The answer depends on where your property sits on title and which state it’s in. Here’s how the desk sorts it.

Your property position	Usual structure	Why it fits an ATO payout
Victorian property with a bank mortgage and spare equity	Caveat loan	Noted on the Victorian title behind your existing lender, and can move very quickly
Property in any other state with a bank mortgage	Short-term second mortgage	Registered behind the bank, usually arranged just as fast as a caveat
Property owned outright	Short-term first mortgage	Cleanest security, often the most room to borrow
Property already listed or under contract	Bridging-style loan repaid from the sale	The sale proceeds are the exit, so the term can be tight
No property, but strong trading history	Unsecured or cash-flow option, typically $5k to $500k	Sized on turnover and bank statements rather than equity

The structure isn’t a technicality. A caveat or second mortgage sits behind your existing lender, so the amount available depends on how much equity is left after the first loan. A first mortgage over an unencumbered property usually gives the most room.

Can a caveat loan pay an ATO debt?

Yes, when the property is in Victoria. We lodge a caveat on the Victorian title behind your existing bank loan, the ATO is paid from the loan at settlement, and the caveat is withdrawn when you repay us. Your home loan isn’t refinanced or touched, which is a big part of why it can move in days. The Victorian caveat loans page explains the title side.

If the property is in New South Wales, Queensland or any other state or territory, we write a short-term registered second mortgage instead. It does the same job behind your bank and is usually arranged just as quickly. Either way the loan must be for a business purpose, and clearing a business tax debt is one.

Can you use a loan to pay a BAS or GST debt?

Yes. An overdue BAS is a tax debt like any other, whether it’s GST, PAYG withholding or PAYG instalments, and a short-term loan can pay it in full at settlement. Two points make BAS debts more pressing than most:

• GST and PAYG withholding are covered by the director penalty regime. For a company, unpaid amounts can become a director’s personal liability. See director penalty notice loans.
• Lodging on time still matters when you can’t pay. PAYG withholding and GST reported more than three months late can lead to a lockdown penalty that only full payment remits. Keep lodging, then deal with the payment.

Which tax debt page fits your situation?

• Not sure what your options are yet? Start with tax debt help for business.
• A deadline this week? See urgent loans for tax debt.
• Your bank account or customers have been garnisheed? See ATO garnishee notice help.
• A director penalty notice has arrived? See paying a DPN within 21 days.
• A letter about reporting your debt to credit bureaus? See ATO debt credit reporting.
• Weighing a plan against borrowing? See ATO payment plan vs business loan.

What does a lender need to see when there’s tax debt?

Less than most owners expect, but it needs to be honest. Private lenders assess the property and the exit, and ATO debt is considered case by case. Bring:

• your current ATO statement of account (and any notice you’ve received);
• title details for the property, plus the balance on any existing mortgage;
• a short note on how the loan will be repaid and roughly when;
• ID, ABN or ACN details, and recent business bank statements if you have them.

If you’re still working out the numbers, the borrowing calculator gives a rough equity figure in a minute. When you’re ready, tell us about the ATO balance and the property and someone will call you to talk it through.

How does the exit work?

Every short-term loan is measured in months, not decades, so the repayment plan matters more than the paperwork. Common exits for an ATO payout loan:

1. Selling a property. The loan is repaid from the sale proceeds at settlement. If a sale is already in play, see funds while waiting on a property sale.
2. Refinancing to a bank. Once the ATO balance is cleared and lodgements are up to date, a mainstream lender often looks at the business differently. Our guide to clearing an ATO plan before a property sale covers the timing.
3. Collections or a known receipt. A large debtor payment, a contract milestone or a refund that’s genuinely on its way.

An exit doesn’t have to be signed and sealed, but it does need to be specific. “We’ll refinance when the books are lodged in March” is a plan. “Things should pick up” isn’t.

An illustrative example

This example is illustrative only — round numbers, no real client.

A Melbourne joinery company owes the ATO $180,000 across BAS and PAYG withholding. One director owns a home worth about $1.4m with $600k owing to a bank, which leaves an LVR of roughly 43% before any new lending. The company has received a notice warning that the debt may be reported to credit bureaus.

We lend $190,000 by caveat over the Victorian home, enough to cover the ATO balance and the loan costs. Funds go straight to the ATO on settlement. The exit is a planned refinance of the company’s equipment and a commercial loan once the cleared ATO account and up-to-date lodgements are in hand, expected in around four months.

Had the home been in Brisbane instead of Melbourne, the same deal would have been written as a registered second mortgage with much the same timing.

Should I take a payment plan instead?

Sometimes, yes. Online, the ATO lets businesses and individuals owing $200,000 or less set up a plan themselves, and for a modest debt that can be the sensible move. A short-term secured loan tends to make more sense when:

• the balance is large and a plan would run for a long time, with GIC compounding the whole way;
• a director penalty notice or credit reporting notice has already arrived;
• a bank refinance is being held up by the open ATO debt;
• you have a defined event coming — a sale, a settlement, a big receipt — that would clear a loan quickly.

Talk to your tax agent about the tax side of any third-party finance. The ATO recommends it, and it’s a short conversation worth having before you sign.

We don’t flinch at tax debt — see if you qualify

Owing the ATO is one of the most common reasons owners call us, and it’s not a dead end when there’s property behind the business. The enquiry takes about 60 seconds and there’s no credit check when you first enquire. Your details stay with us — the people who actually lend the money — instead of being blasted out to a dozen lenders, and a real person looks at your numbers and calls you back.

Please fill the form in accurately — especially the property address, which state it’s in, the ATO balance and any deadline on a notice — so the first call gives you a real answer.

Check what’s possible for your ATO debt →