Managing ATO Debt: Can You Still Get Finance?
For many self-employed professionals and business owners, a tax bill isn’t always a sign of poor management. Often, it’s simply a timing mismatch between cash flow and obligations. However, when that bill turns into a lingering debt with the ATO, many assume their borrowing options have hit a wall.
The reality is quite different. Having a tax debt does not automatically disqualify you from obtaining finance. Whether you are looking to purchase a property or simply restructure your finances, there are viable paths forward.
Here is a breakdown of your options when managing ATO debt.
Option 1: Borrowing While Keeping the ATO Debt
A common misconception is that you must pay out your tax debt before a lender will look at you. In reality, if you are looking to purchase a property or access funds for business growth, and you need to keep your current tax arrangement in place, you do have options.
Mainstream Lenders
Believe it or not, some mainstream lenders will consider an application from a borrower with existing tax debt. The non-negotiable requirement here is a formal payment plan. Generally, these lenders will want to see:
A formal arrangement in place with the ATO.
A history of perfect conduct on that arrangement (often 6 months or more) to prove the debt is being managed responsibly.
Serviceability that demonstrates you can afford the new loan repayments plus your ongoing ATO commitment.
Specialist Lenders
If your financials are not up to date, or you haven’t had the payment plan in place for long enough to satisfy a major bank, specialist lenders are often the solution. These lenders take a more commercial view. They can look past the "tick box" criteria and assess the strength of your business using alternative documentation (Alt Doc), such as BAS statements and an accountant’s declaration or business bank statements, allowing you to secure finance even while the tax debt remains.
Option 2: Refinancing to Clear the Debt
For those who already own property (residential or commercial), keeping the ATO debt may be the less efficient choice. A smarter strategy might possibly be to refinance your mortgage or commercial facility to pay out the tax debt entirely.
This involves accessing the equity in your property to clear the ATO balance. This strategy has three major benefits:
Lower Interest Rate: Mortgage rates are significantly lower than the ATO’s General Interest Charge (GIC).
Cash Flow: Instead of a short-term, aggressive payment plan with the Tax Office, the debt is amortised over the life of your loan, drastically reducing your monthly outgoings.
A Clean Slate: You remove the stress of the debt, and the risk of further ATO action.
The Game Changer: July 2025 Regulations
Deciding between "keeping" the debt and "clearing" it became a much easier choice in mid-2025. As of July 2025, the Australian Government introduced changes which removed the tax deductibility of the ATO’s General Interest Charge (GIC).
Previously, business owners could at least claim a tax deduction on the interest charged on their tax debts, which softened the blow. That cushion is now gone. This means the high interest being charged by the ATO is now a pure cost that directly reduces your business's bottom line.
Because of this, holding onto ATO debt has become significantly more expensive for business owners. For many, this regulatory change makes refinancing the debt into a lower-rate mortgage not just a smart cash flow decision, but a critical profitability decision.
Final Thoughts
ATO debt is a common hurdle, but it doesn't have to be a roadblock.
If you need to buy: There are lenders who will support you, provided you are managing the debt responsibly.
If you have equity: Refinancing could be the smartest financial move, especially in light of the new tax rules.
The key is not to hide from the situation. Contact Imperium Finance today. We can assess your position and help you structure a solution which manages your debt and keeps your financial goals on track.