Payment plan

Suppliers, landlords and finance companies all agree to payment plans, but in Australian business lending the phrase almost always refers to one creditor: the Tax Office. When BAS, PAYG withholding or income tax can’t be paid on time, an ATO plan turns a single overdue amount into weekly, fortnightly or monthly instalments.

How an ATO payment plan works

For business debts of $200k or less, the ATO generally lets owners arrange the plan themselves in its online business portal, and registered tax agents can lodge one on a client’s behalf. Bigger balances, or anything the self-service system rejects, are negotiated by phone, where the ATO works through the business’s earnings, outgoings and assets before it settles on terms.

A few points owners often miss:

• You generally need your lodgements up to date. A plan covers what’s owed, and the ATO wants to see the full picture.
• The general interest charge (GIC) keeps running on whatever is unpaid, so a longer plan costs more.
• Extra payments are allowed at any time and cut the interest.
• New tax that falls due while the plan is running has to be paid on time as well. Falling behind on current obligations is a common reason plans fail.

Why the cost changed in 2025

For years, owners could at least claim GIC at tax time. New legislation ended that: GIC charged from 1 July 2025 is off the deductions list, no matter which year the original tax relates to. A loan taken out to settle the ATO is treated differently: interest on business-purpose borrowing is ordinarily claimable. Your tax agent can tell you how that applies to you, but it’s one reason more owners now compare a plan with a tax debt loan.

One more date to diarise: credit card payments to the ATO end on 30 November 2026. If your plan instalments are set up on a card, they need moving to another method before the first instalment due after that date.

How lenders view a payment plan

A plan that’s being kept is usually a good sign. It shows the debt is under control, and the ATO counts compliance with a plan as engagement, which matters because a business that ignores a tax debt of $100k or more, left unpaid beyond 90 days, risks having it disclosed to the credit reporting agencies. For lenders, the plan is simply another commitment to factor into what you can afford.

A plan that has defaulted is a different story. Once cancelled, the whole balance is due and the risk of a director penalty notice or garnishee notice rises sharply. For owners in that position, our page on funding an ATO payment plan default sets out the options in order.

Example: plan or loan?

A Wollongong electrical contractor owes $85k after two lean quarters, mostly GST and withholding. A 24-month ATO plan would mean instalments of about $3,500 a month plus GIC, none of which is deductible. The other route is borrowing against the family home with a second mortgage and clearing the ATO in one hit, with deductible interest, no ATO debt on record and repayments spread over a longer term.

Neither is automatically better. The plan avoids putting the home on the line; the loan may cost less after tax and closes the ATO account for good. Our business loan vs ATO payment plan comparison and ATO debt calculator help put both in dollars. Want a second opinion on your own numbers? Start with a quick enquiry.

Owe the ATO and weighing your options?

An overdue tax bill is everyday business for us, and it says nothing bad about you as an operator. A plan that’s working is worth sticking with. One that’s choking cash flow, or has already slipped, may be cheaper to clear another way. The form is short, roughly sixty seconds, and sending it won’t trigger any credit check. Your enquiry isn’t parcelled out to a list of lenders either. One person on our team looks at what you owe and how the business is tracking, then calls you directly. Include the real ATO balance and any missed instalments so the advice matches your situation.

Talk to us about clearing a tax debt →