Your BAS agent raised the ATO debt — weighing a loan against a payment plan

BAS agents live inside your activity statements and, very often, inside your ATO portal. So when one tells you the running balance with the tax office has become a problem, they’re usually right — and they’ve probably been watching it build for a while. This page helps you weigh the options calmly and work out which one suits your business.

First things first: keep lodging

Even when you can’t pay, the ATO’s guidance is clear that lodging on time matters because it keeps your information current. It also matters to lenders. A business with a debt but a perfect lodgement record reads very differently from one with a debt and three missing activity statements. If you’re behind, our BAS lender-ready quiz shows how a lender is likely to see your history.

What has changed for ATO debts recently?

Two developments make ATO debt more expensive to sit on than it used to be:

• Interest is no longer deductible. From 1 July 2025, the general interest charge (GIC) and shortfall interest charge the ATO adds to unpaid amounts stopped being tax-deductible. That law is in place.
• Credit reporting. An ABN holder with six figures of tax overdue for more than three months can have that debt reported to the credit bureaus, unless it’s engaging with the ATO — a payment plan being honoured is the usual example.

Neither of these means you must borrow. They simply change the maths and raise the stakes of doing nothing.

Payment plan or business loan?

Factor	ATO payment plan	Business loan to clear the debt
Set-up	Online for debts of $200,000 or less; otherwise by contacting the ATO	Application, assessment and documents
Ongoing cost	GIC accrues on the outstanding balance (not deductible from 1 July 2025)	Loan costs set by the lender and your circumstances
Flexibility	Must keep up with new lodgements and payments	Fixed repayments; ATO balance cleared
Effect on other borrowing	Lenders see the plan and factor in its repayments	ATO debt gone; loan repayments factored instead
Credit reporting risk	Engaging with a compliant plan generally avoids disclosure	Debt cleared, so disclosure risk falls away

Ask your BAS agent or accountant to compare the two options over the same period using real figures. We don’t publish loan rates because every facility is priced on the business’s situation, so the honest way to compare is a total-cost figure for your actual file.

When does a loan usually make more sense?

Owners tend to lean towards refinancing when:

• The ATO balance is large and growing, and a payment plan’s repayments would strain cash flow
• The business wants a clean ATO account to support other applications, such as tenders or supplier credit
• There’s property equity available, which can allow a longer term and lower repayments
• The business has been offered a plan that’s too short to be realistic

A payment plan is often the better first move when the debt is modest, cash flow can carry the instalments, and the business would struggle to meet a lender’s requirements right now.

What will a lender ask for?

Expect requests for:

• An ATO account statement or portal printout showing the balance, any plan and the history (how lenders read it)
• Recent BAS copies and confirmation that lodgements are up to date
• Business bank statements
• A short explanation of how the debt arose and what’s changed since

That last one is where your BAS agent earns their keep. A clear, factual paragraph — “GST collected on a large project was used to fund materials when the client paid late; the project is complete and invoicing has been fixed” — changes how the file is read. See explaining red flags to lenders for examples.

How property can change the picture

If you or the business own property, a secured loan can clear the ATO debt over a longer term, sometimes with room for working capital too. Secured facilities here range from $20k to $5m and can sit as a first or second mortgage, or as a caveat for shorter terms. ATO debt and past credit issues are considered case by case.

An illustrative comparison

Consider a hypothetical landscaping company with an activity statement balance of about $85,000 built up over three quarters. Its BAS agent sets out two paths for the owner:

• Payment plan: around 18 months of instalments to the ATO, with interest accruing on the falling balance and no deduction for it. The instalments sit on top of each new quarter’s BAS, so cash is tight every quarter.
• Business loan: the ATO balance is cleared in one payment, and the company repays a lender over a longer agreed term. The ATO account starts clean, and the owner only has to keep up with new BAS as it falls due.

Neither is automatically better. The company’s accountant compares the two on total cost and on the lowest monthly cash position, and the owner chooses based on which leaves the business more breathing room. The figures here are illustrative only; your own comparison needs your own numbers.

What your BAS agent can do for you right now

Before any decision, ask your agent to:

1. Confirm every activity statement is lodged, or lodge what’s outstanding
2. Download a current account statement and transaction history from the ATO portal
3. Note any penalties or interest that could be remitted on request
4. Draft a short, factual explanation of how the debt arose

Those four items make both paths — a plan or a loan — faster to set up. They also form the core of what a lender will ask for, so nothing is wasted.

Get both options on the table

Your BAS agent has done you a favour by naming the problem. Now find out what a lender would actually offer. Make a 60-second enquiry — there’s no credit check to ask, your details are matched to one appropriate lender rather than sent everywhere, and a real person calls you to talk it over. Be precise about the ATO balance and any plan in place, because accurate answers let us point you to the right option the first time. Compare your options with a specialist.