Setting up an ATO payment plan before you apply for finance

Why a payment plan changes how lenders see you

To a lender, a tax debt raises two questions. How big is it, really? And is it under control? An overdue debt with no plan answers neither. It could grow. The ATO could escalate collection. Directors might face personal liability. A lender looking at that file has no way of knowing where it ends.

A payment plan answers both questions. The balance is confirmed, the repayments are scheduled, and if you’ve kept to the plan for a few months, there’s evidence the business can manage it. That’s why so many lenders that would decline a business with an ignored tax debt will consider one with a plan in place.

If you’ve already been declined because of tax debt, our page on why lenders decline for ATO debt explains the thinking in more detail.

Step 1: find out exactly what you owe

Start with facts. Log in to the ATO’s online services for business, or ask your registered tax agent, and download a current statement of account. Check:

• the total balance owing,
• what each part relates to (income tax, GST, PAYG withholding, PAYG instalments, super guarantee charge),
• any penalties and general interest charges,
• whether there are any outstanding lodgements.

If lodgements are missing, the balance may not be final. The ATO may also have raised estimates. That’s one reason lodgements come before anything else.

Step 2: bring lodgements up to date, or agree a timetable

Payment plans generally work best when your lodgements are current. Outstanding BAS and returns can affect eligibility and how the ATO views your request. They also matter to lenders, who want to see a complete picture.

If you’re behind, work with your accountant to lodge the most recent and most important ones first. Our guide to catching up on overdue tax returns suggests an order of work. If it will take time, get the timetable in writing; it’s useful evidence for both the ATO and a lender.

Step 3: work out what you can genuinely afford

A payment plan only helps if you can keep to it. Look honestly at your cash flow:

Item	Monthly figure (illustrative)
Average monthly deposits	$85,000
Regular costs (wages, rent, suppliers, super)	$68,000
Current tax obligations (new BAS, PAYG)	$7,500
Existing loan repayments	$4,000
Available for the old ATO debt	$5,500

The figures above are illustrative. The key point is that the plan instalment has to fit alongside current tax obligations, not instead of them. The ATO expects new liabilities to be paid on time while the old debt is repaid.

Offer an amount you can keep paying even in a slower month. A modest plan kept beats an ambitious plan broken.

Step 4: set up the plan

Many businesses can set up a payment plan through the ATO’s online services, or through their registered tax agent, without needing to call. Larger debts, longer plans or more complex situations may require a discussion with the ATO, and the ATO may ask about your financial position.

When you set it up, record:

• the date the plan started,
• the instalment amount and frequency,
• the total balance covered,
• any conditions the ATO has attached.

Keep a copy of the confirmation. You’ll give it to a lender later.

Step 5: keep to it, and keep everything else current

This is where many plans fail. The business pays the instalments but falls behind on the next BAS, or keeps up with the BAS but misses an instalment. Either can cause the ATO to cancel the plan.

Practical habits that help:

• Set aside a fixed weekly amount for tax in a separate account.
• Schedule plan instalments the day after your main deposits arrive.
• Diarise every BAS and instalment due date.
• If you know you’ll struggle, contact the ATO before the due date.

Step 6: what to give a lender

When you apply for finance, provide:

1. a current ATO statement of account,
2. the payment plan confirmation,
3. evidence of instalments paid (bank statements usually show this),
4. your lodgement status, with any outstanding items and a timetable,
5. a short note explaining how the debt arose and what’s changed.

A few months of kept instalments makes this much stronger. If you can wait that long, do. If you can’t, provide the plan and explain the timing.

Ready to talk about funding with a payment plan in place? Start a short enquiry.

When clearing the debt might be better

A payment plan isn’t always the best option. Clearing the debt with a loan can make sense when:

• the general interest charge on the debt is significant and the loan would cost less overall,
• the debt is large enough that it may be reported to credit reporting bureaus under the ATO’s criteria,
• the debt includes PAYG withholding or super guarantee and there’s risk of a director penalty notice,
• the plan instalments would strain cash flow so much that keeping to it looks unlikely,
• the ATO has already escalated collection.

In those situations, a property-secured loan that pays the ATO directly can replace an escalating liability with a known one. It’s a significant decision, and it should be made by comparing the full dollar cost of each option with your accountant.

A word on director penalty notices

If your company has unpaid PAYG withholding, GST or super guarantee charge, directors can become personally liable through director penalty notices. The rules about timing and reporting are important, and the consequences can be serious. Our guide on director penalty notices and borrowing explains why lenders ask about them and why advice should be sought quickly.

Common mistakes to avoid

• Setting a plan you can’t afford just to look good to a lender.
• Ignoring new obligations while focusing on the old debt.
• Applying for finance with no ATO statement, so the lender has to guess.
• Not telling the lender about the debt; they’ll usually find it.
• Missing an instalment without contacting the ATO first.

Illustrative example: A landscaping company owed the ATO for two quarters of GST after a wet spring. The owners lodged the outstanding BAS, set up a payment plan they could afford, and paid four instalments on time. When they then applied for funding to buy a second truck, the lender reviewed the ATO statement, the plan confirmation and steady bank statements, and approved the facility.

What if the ATO won’t agree to the plan you propose?

Sometimes the ATO asks for higher instalments, a shorter term, or more information about your finances before agreeing. That’s not the end of the road. Options include:

• Providing the information requested, such as cash-flow forecasts or details of assets, so the ATO can assess what’s affordable.
• Asking your tax agent to negotiate on your behalf. Agents deal with the ATO daily and often know how to frame a request.
• Paying a lump sum first to reduce the balance, then proposing a plan for the remainder.
• Considering finance to clear part or all of the debt, so the plan that remains is affordable.

If the ATO has refused a plan altogether, act quickly. Get advice from your accountant and consider whether a secured loan to clear the debt is appropriate, before collection action escalates.

Keep a simple payment plan log

Lenders like evidence, and so does the ATO if anything is ever disputed. Keep a one-page log showing each instalment’s due date, the amount, the date paid and the reference. Pair it with the matching lines on your bank statements. When you apply for finance, that log turns “we’re on a plan” into “we’ve paid every instalment on time for five months”, which is a much stronger statement.

Let’s look at your tax position together

A tax debt that’s being managed is something many lenders can work with. Our enquiry takes about a minute, there’s no credit check when you first get in touch, and we won’t send your details out to multiple lenders. A real person reads your situation and calls you. Please tell us the approximate balance, whether a plan is in place and how long it has been running, so we can find the right fit. See if you qualify.