Tax debts sneak up on busy tradies. A big year of work, a BAS that didn’t get paid while you were chasing a slow client, a lump of PAYG you didn’t budget for, and suddenly there’s a number on your ATO account you’d rather not look at. The good news is you have options, and the sooner you act, the more of them you keep.
This guide covers how the ATO’s payment plans work, when a loan makes more sense, and a step by step plan to get the debt off your back.
Key takeaways
- The ATO says you may be able to set up a payment plan online if you owe $200,000 or less.
- The ATO charges interest (the general interest charge) on unpaid tax, calculated daily on a compounding basis.
- From 1 July 2025, that interest is no longer tax deductible.
- A business loan can clear the debt in one hit, so you deal with one lender on a fixed plan.
- Talk to your accountant early. The earlier you act, the more options you have.
Why paying an ATO debt quickly matters more now
The ATO applies its general interest charge when tax remains unpaid after the due date, and it’s calculated on a daily compounding basis. That means the debt grows every day it sits there.
There’s also a newer sting. The ATO confirmed in June 2025 that interest it charges for late payment is no longer tax deductible from 1 July 2025. In the same update, the ATO suggested talking to a finance provider about other ways to fund a tax debt, alongside contacting the ATO early if you can’t pay on time.
In a business bulletin the ATO also pointed out that if you go on a payment plan, you should aim to finish it over the shortest possible timeframe to keep the interest down. Your accountant can tell you how that plays out for your business.
How does an ATO payment plan work for tradies?
According to the ATO’s payment plan guidance, if you owe $200,000 or less you may be able to set up a plan yourself through online services or the automated phone service. You’ll need to deal with the ATO directly instead if, among other things:
- you owe more than $200,000
- you need more than two years to pay
- you’ve had two or more payment plans cancelled or defaulted in the past 12 months
- you’ve had a warning about firmer recovery or legal action in the past six months
- you’re insolvent or dealing with significant financial hardship
A payment plan can be the right move for a smaller debt you can comfortably chip away at. It’s less suited to a larger debt, a business with a history of missed plans, or a tradie who wants the ATO off their account so they can get on with work.
Payment plan vs business loan: which is faster?
| ATO payment plan | Unsecured business loan | Second mortgage | |
|---|---|---|---|
| Speed to clear the ATO | Debt stays on your account until paid off | Some funded within hours | As little as 24 hours, usually a few days |
| Who you owe | The ATO | A lender | A lender |
| Interest | General interest charge keeps accruing | Priced on your circumstances | Priced on your circumstances |
| Paperwork | ATO online services, lodgements | Recent business bank statements | ID and property details, no financials |
| Suits | Smaller debts you can repay steadily | Tradies trading 6+ months, no property | Larger debts, credit issues, tradies with equity |
A loan doesn’t make the debt disappear. It moves it to a lender with a set term, and often a cleaner plan. Every loan is priced on your circumstances, and our lending team looks for the sharpest rate available for your situation. You and your accountant can then weigh up the true cost against staying with the ATO.
Step by step: how to clear an ATO debt fast
- Get the exact figure. Log in to ATO online services (or ask your accountant) and confirm what’s owed, including any interest and penalties.
- Catch up on lodgements. Outstanding BAS or tax returns make every option harder. Lenders want to see you’re up to date or close to it.
- Talk to your accountant. Ask what the debt looks like once upcoming lodgements are done, so you only borrow once.
- Decide on the route. A small debt might suit a payment plan. A larger one, or one that’s attracting firmer action, often suits a loan.
- Pick the loan type. No property and trading 6 months or more: look at cash flow loans for tradies. Own property with equity: a fast second mortgage usually works best.
- Pay the ATO directly. Once funded, pay the debt using the ATO’s payment reference so it’s cleared properly.
- Set up for next quarter. Open a separate account and move a slice of every payment into it for BAS and PAYG.
Example: a plasterer with a growing BAS debt
Example only. A plastering business on the Gold Coast has fallen behind on two quarters of BAS after a builder went quiet on payments. The hypothetical debt is $85,000, and the business has been trading for four years with steady bank statements.
The owner wants it gone in one hit, not dragged out. An unsecured business loan sized to turnover could clear the debt within days, and in some cases the same day. The business then repays the lender on a fixed plan from ongoing work.
Example: a builder with a larger tax debt and other debts
Example only. A small builder in Adelaide has a hypothetical $240,000 ATO debt plus two equipment loans and credit cards. Because the tax debt is over $200,000, setting up a plan online isn’t an option.
He owns his home with good equity. A second mortgage could pay the ATO in full and roll the other debts into one loan, leaving one repayment instead of five. This is the kind of situation our debt consolidation page covers.
Key facts
- Loan size: $20,000 to $5 million
- Unsecured option: tradies with an ABN trading 6+ months, sized to turnover
- Secured option: equity in property you or a guarantor already own, no financials needed
- Speed: some unsecured loans within hours; property secured loans in as little as 24 hours
- Term: typically 1 to 12 months for property secured loans
- Purpose: business purposes, including tax and BAS debts
How do I get started?
If a tax debt is weighing on the business, read more on our ATO debt loans for tradies page, or check your options with our 60 second form. Enquiring won’t affect your credit score and a lending specialist will tell you quickly if we can help.
