Can you get a business loan with ATO debt?

No two credit policies are identical, but the questions are remarkably consistent. A lender is trying to work out whether the ATO is about to become a bigger problem than it already is, because the ATO has powers an ordinary creditor does not, and a lender does not want to be standing behind it.

An ATO payment plan turns an open-ended liability into a known, scheduled one. That is exactly what a credit assessor needs: they can deduct the instalment from your cash flow, see whether the loan repayment still fits on top of it, and move on.

Without a plan, the assessor has to assume the ATO could demand the full amount at any time. Some lenders will still look at it, usually where the loan itself pays the ATO out at settlement, but the field narrows considerably.

If you owe the ATO and do not have an arrangement, setting one up is usually the first thing to do, before applying for anything. Smaller debts can often be put on a plan through ATO online services without a phone call. Lenders generally want to see a few months of instalments paid on time, so the sooner the plan starts, the sooner that history exists.

A business that owes money but has lodged every BAS on time is telling a lender it is organised and facing the problem. A business with overdue lodgements is telling them something else, and is also exposing its directors.

Under the director penalty regime, directors can become personally liable for a company's unpaid PAYG withholding, GST and superannuation guarantee. Where those amounts are reported to the ATO within three months of their due date, directors generally have options to remit the penalty. Where they are not, the penalty can be 'locked down', which removes most of those options. Lenders know this, which is why an overdue BAS can stop an application that an ATO balance alone would not.

The practical advice is simple: lodge on time, even when you cannot pay on time.

The ATO can disclose a business's tax debt to registered credit reporting bureaus when the business has an ABN, owes at least $100,000 that has been overdue for more than 90 days, and is not effectively engaging with the ATO to manage it. Entering and keeping to a payment plan is generally treated as engaging.

Once a debt is reported it shows up when any lender checks the business's credit file, so a debt that might otherwise have stayed private becomes part of every application. This is another reason to get an arrangement in place early: it can keep the debt off the file in the first place.

Sometimes. Since 1 July 2025 the ATO's general interest charge is no longer tax deductible, so carrying a large debt on a payment plan costs more after tax than it used to. Interest on a business loan used for business purposes generally remains deductible. For some businesses, that difference alone makes refinancing worth looking at.

The other reasons are practical. Paying the ATO out removes the risk of a director penalty notice, clears the debt from your credit file if it has been reported, and replaces a creditor with enforcement powers with one that has a contract.

The reasons not to are just as real. A short-term unsecured business loan can carry repayments well above your ATO instalment, and swapping a manageable plan for a loan that strains your weekly cash flow solves nothing. Compare the repayment, not just the rate. Your accountant should be part of that conversation, because the tax position is specific to your business.

Unsecured term loans are the most common route for debts up to a few hundred thousand dollars, because the decision rests on recent bank statements rather than a valuation. Several specialist lenders will settle the loan by paying the ATO directly.

A business line of credit suits a different problem: a business that is not in arrears but keeps running short at BAS time. Drawing on a limit for the quarterly bill and repaying it as revenue comes in can stop a payment plan becoming necessary at all.

Larger debts, or debts alongside other borrowing, often end up in a secured business loan against property, where the longer term brings the repayment down to something the business can carry.

Bringing these with you lets a lender assess the file properly the first time, instead of coming back with questions that cost a week.

Get on a payment plan, keep it current, lodge on time and know your numbers. With those four things in place, ATO debt is a detail in an application rather than the reason it fails. If you want to see where you stand, start an application. It produces options, not obligations, and the first look uses a soft credit enquiry that does not mark your file.