Credit & Eligibility · 6 min read
Can you get a business loan with an ATO tax debt?
Yes — many non-bank lenders fund Australian businesses that owe the ATO, and some lend specifically to clear tax debt. Here's what lenders check, and why a payment plan changes everything.
Short answer
Yes. An ATO tax debt does not automatically rule you out. Banks tend to treat it as a red line; the non-bank lenders Avoir works with read it as one line item in your cash flow, not a disqualifier. Some lenders will even advance funds specifically to pay out an ATO debt — and with the General Interest Charge now sitting at 11.43% per annum and, since 1 July 2025, no longer tax-deductible, clearing that debt is often the cheaper path.
Meeting a lender's criteria makes you eligible to apply; it doesn't guarantee approval, and the lender makes the final call.
Why the ATO is different from an ordinary creditor
Two things make tax debt matter more than an equivalent supplier debt.
The General Interest Charge is high, compounds daily, and is no longer deductible.For the July–September 2026 quarter the GIC rate is 11.43% per annum, calculated daily on the overdue balance — and from 1 July 2025 you can no longer claim it as a tax deduction. That second change is the one most business owners haven't priced in: an ATO debt now costs you more in real terms than it did a year ago. It's the core of the refinancing argument — if a loan clears the debt at a lower effective cost than a non-deductible, daily-compounding 11.43%, the business is usually better off. Check the current GIC rate before relying on the comparison; the ATO updates it quarterly.
How the refinance works
ATO debt left in place
GIC at 11.43% p.a., compounding daily · no longer tax-deductible · balance grows every day it's unpaid
↓ refinance onto fixed-term business finance
ATO balance cleared in full
GIC stops accruing · one fixed repayment on known terms · interest on a business loan is generally deductible (confirm with your tax agent)
The ATO can report business tax debts to credit bureaus. Under the ATO's Disclosure of business tax debts rules, the ATO may report a debt to credit reporting bureaus where a business has an ABN, the debt is at least $100,000 and more than 90 days overdue, and the business is not effectively engagingwith the ATO to manage it. You get a 28-day warning notice first. Once reported, the debt can show on your commercial credit file and change how every other lender sees you. The practical takeaway: a tax debt you're actively managing looks completely different to a lender than one you're ignoring.
What lenders actually look at
Is there a payment plan in place?
An active ATO payment arrangement is the single biggest lever. It signals the debt is under control and turns an “unmanaged liability” into a “known, scheduled outgoing.” Many lenders that would decline an unmanaged debt will assess an application where a plan is being met.
Your recent bank statements
Cash-flow lenders weigh the last 6 months of trading over any single number on your credit file. Consistent revenue that comfortably covers a plan plus a new repayment is what they want to see.
The size of the debt relative to turnover
A $15k ATO balance on a business turning over $2m reads very differently to a $200k balance on the same revenue.
Whether the loan clears the problem
Lenders are more comfortable when the funds resolve the tax debt outright rather than stacking a new repayment on top of an unresolved one.
Your realistic options
1. Refinance the ATO debt into a business loan
Clear the balance, stop the GIC, and repay the lender on fixed terms. Strongest when the loan's cost is below the non-deductible GIC you're carrying. Often an unsecured business loan is enough for smaller balances.
2. Get a payment plan first, then borrow for growth
If the debt is small and manageable, arrange a plan with the ATO, keep it current for a few months, and apply for a working-capital facility separately.
3. Secured or caveat finance for larger debts
Where the debt is large relative to turnover, a lender may want security (property or a caveat) to get comfortable. Faster to approve, but understand the risk you're taking on.
Sole traders can apply too — the same logic applies whether you trade as a sole trader or a company.
What won't help
Applying to a dozen banks and collecting knock-backs and hard credit enquiries. Each enquiry is visible to the next lender. A specialist who knows which lenders are comfortable with tax debt will get you a cleaner outcome — that matching is what Avoir does, on a soft check that doesn't touch your score.
FAQ
Can I get a business loan while I still owe the ATO?
Often yes, particularly with a payment plan in place. Non-bank lenders assess your overall cash flow rather than treating an ATO balance as an automatic decline.
Will a loan to pay the ATO save me money?
It can. The General Interest Charge is 11.43% p.a. for the July–September 2026 quarter, compounds daily, and is no longer tax-deductible since 1 July 2025, so refinancing onto fixed terms often reduces your true cost. Compare the current GIC rate against the loan rate before deciding.
Does an ATO debt show on my credit file?
It can. The ATO may report business tax debts of $100,000 or more that are over 90 days overdue where the business isn't engaging with the ATO. You receive a 28-day warning first, and keeping to a payment arrangement is how businesses avoid it.
Do I need property as security to borrow with an ATO debt?
Not always. Smaller tax debts are often refinanced unsecured on cash flow. Larger debts relative to turnover may need security or a caveat.
READY TO FIND OUT WHAT'S AVAILABLE?
Check your options — even with an ATO debt
Apply in two minutes. Soft credit check only — no impact on your score. A specialist will review your situation and let you know which lenders can work with your profile.
Apply now — it's freeSources
- ATO — General interest charge (GIC) rates
- ATO — Disclosure of business tax debts (enquiries 1300 303 570)
By James Baker · Founder, Avoir
Founder of Avoir and a commercial finance specialist focused on asset and equipment finance for Australian transport, civil and construction businesses.
Last reviewed: 24 July 2026
Rates and thresholds are point-in-time as at the review date above; the GIC rate changes quarterly, so verify the current figures before relying on them. General information only — not tax, legal, or financial advice, and it doesn't take your circumstances into account. Speak to a registered tax agent before acting. Avoir is not a lender or credit provider; all credit decisions are made independently by our lending partners.