Business loans when your tax returns aren't up to date

Being twelve or twenty-four months late on income tax lodgments happens to plenty of healthy firms. The owner was busy keeping the doors open, the bookkeeper left, the accountant got swamped, a messy year felt too hard to face. None of that makes the business unfundable. It does change which lenders will talk to you, what they’ll ask for, and the order in which you should do things.

This page is about income tax returns for the business (and for you, if you’re a sole trader or the trust distributes to you). Late activity statements are a related but sharper problem, covered on our page about business loans when BAS lodgements are late.

What does a missing return hide from a lender?

A lodged return does two jobs for a lender. It shows the profit the business declared to the ATO, which is the figure most banks use to test whether you can afford repayments. And the notice of assessment that follows tells them how much tax you owe for that year.

When a return is missing, the lender loses both. It can’t see a verified profit, and, more worrying, it can’t see the tax bill. An unlodged year could mean a refund, a small bill or a five-figure liability with penalties attached. Underwriters treat an unknown ATO debt as worse than a known one sitting on a payment plan, because the ATO ranks among the creditors with real enforcement power: garnishee notices, director penalties and, eventually, winding-up action.

So the question in an underwriter’s head is rarely “why are you late?” It’s “how big is the bill that’s coming, and will it get paid before ours?”

Which lenders will look at you right now?

Banks are often the cheapest source of business finance around, and if your returns are a few months late with a firm lodgment date, it’s worth a conversation with your relationship manager. In most cases, though, a bank’s credit policy wants two complete years of returns and notices of assessment before it will assess a business loan. If that’s where you are, these are the lenders who work from different evidence.

Lender type	What they rely on instead	Typical size	What to watch
Low-doc lenders	BAS, accountant’s letter, bank statements	Varies with turnover	Usually want BAS lodged and current
Bank statement and unsecured lenders	Six to twelve months of business account activity	Typically $5k to $500k	Short terms, daily or weekly repayments
Second mortgage lenders	Equity in property, plus serviceability	$20k to $5m	Will ask about any looming ATO debt
Caveat lenders	Equity and a clear exit within months	$20k to $5m	Highest total cost, short term
Equipment finance	The asset itself as security	Asset value	Some funders still want recent financials over set amounts

The pattern is simple. The less a lender can rely on your tax paperwork, the more it relies on something else: bank statements, property or the asset being bought. Each step down that ladder generally costs more in total dollars, which is why lodging is worth doing even while you borrow.

If you want a quick read on which row fits, tell us where your lodgments stand and one of our specialists will ring to work through it.

Three deadlines that make this more urgent than it looks

The 31 October rule. Under the ATO’s registered agent lodgment program, a taxpayer who had any prior-year return still outstanding at 30 June loses the usual extended due date for the current year’s return. That return is instead due by 31 October. In practice, once you fall behind, the agent concessions that keep most businesses comfortable stop protecting you, and the gap tends to widen rather than close.

The failure-to-lodge penalty went up. For a small business, the ATO’s penalty is one penalty unit for each 28 days a document is late, capped at five units. The Commonwealth penalty unit rose to $364 for offences on or after 1 July 2026, so a single overdue return or activity statement can now attract up to $1,820. Several years of overdue documents adds up quickly, and lenders see those penalties on your ATO statement.

Late BAS can lock in director liability. This one applies to companies. If a company’s activity statements reporting PAYG withholding aren’t lodged within three months of their due date, a director penalty for the unpaid amount can become “locked down”, meaning it can generally only be removed by paying the debt in full. Overdue income tax returns don’t trigger that rule, but owners who are behind on returns are frequently behind on BAS too. Check both. Our page on director penalty notice funding explains what to do if one has already arrived.

What should you lodge first?

Outstanding documents don’t all carry equal weight to a lender. If your accountant can’t catch up everything at once, this order usually works best:

1. Overdue BAS. These carry the director penalty risk, and nearly every non-bank lender asks for them.
2. The most recent income tax return. One current year shows today’s profit and is worth more to an underwriter than an older one.
3. The year before that. Two consecutive years bring most bank policies back into reach.
4. Older returns. Still needed to clear penalties and tidy the ATO account, but they rarely make or break the loan.

Ask your accountant for an estimate of the tax on each unlodged year before anything is lodged. Plug the total into our ATO debt calculator to see what a debt of that size could look like over time, and whether it changes how much you need to borrow.

A worked example

An illustrative case. A Pty Ltd landscaping business turning over about $1.4m has lodged every BAS, but the company return for the last two financial years hasn’t been done after a change of accountant. The owner needs $180k for two trucks and to cover a slow winter.

The bank says it will reconsider once both returns and notices of assessment are in hand, which the new accountant estimates will take ten weeks. Waiting isn’t an option because the trucks are needed for spring contracts.

What works:

• The trucks go through equipment finance, secured by the trucks themselves, with recent BAS and bank statements as support.
• The working capital piece, $60k, comes from a bank statement lender on a short term.
• The accountant’s estimate shows a tax bill of roughly $40k across the two years. The owner sets that money aside rather than borrowing more for it.
• Once the returns are lodged and the notices arrive, the owner goes back to the bank to refinance the short-term debt into something cheaper.

The key move was telling every lender about the lodgment gap at the start, along with the accountant’s timetable. Nobody was surprised, so nobody walked away.

Mistakes that cost owners the loan

• Hiding the gap. A missing notice of assessment or an ATO statement will reveal it. Lenders forgive lateness far more readily than concealment.
• Lodging a return with a big bill in the middle of an application. Plan the timing with your accountant so the new liability is disclosed, not discovered.
• Borrowing for the tax before you know the figure. Get the estimate first; borrowing too little means a second application, and borrowing too much costs money.
• Treating the loan as the whole fix. If the books are behind because there’s no bookkeeper, the same problem will return next year. See our guide to the documents that speed up a business loan.
• Applying everywhere at once. Every application adds an enquiry to your file. Choose the lender type first.

Behind on returns and need funding now? Here’s how we can help

Being behind on paperwork comes up in a large share of the enquiries we see, and it’s rarely the whole story. Usually there’s a solid business underneath, a reason the returns slipped, and a specific thing the money is for. Matching that to a lender who’ll accept the paperwork you actually have is what we do.

The enquiry takes about a minute. Nothing is run against your credit file while you’re simply asking what’s possible, and we won’t circulate your file to a crowd of lenders. A member of our team reads what you wrote, then phones. On the form, be straight with us about which returns and BAS are outstanding; it’s the single detail that most changes which lender we’d point you to.

Check your options with returns outstanding →