Cash, a payment plan or a loan? Compare the total cost honestly.

There is no universal cheapest-to-dearest ranking

Using available business cash may avoid borrowing costs, but could leave too little for payroll or essential supplies. An ATO plan may spread payments while GIC continues. A loan may offer a different schedule but adds lender fees, interest and possible security.

A valid ranking requires your debt amount, timing, actual rates and all fees. We do not label one option “cheapest” without those inputs. Compare total cost alongside operational risk and repayment flexibility.

The best option is not always another loan

An ATO payment plan spreads payments under an arrangement with the ATO. A business loan replaces an eligible ATO balance with a lender debt. Both need repayments, and either can create difficulties if the business cannot sustain them.

The general interest charge may continue on an unpaid ATO balance. A loan has its own interest and fees, and may require security or guarantees. Compare the complete cost and your business’s capacity, rather than choosing on the lowest instalment alone.

Questions worth asking before you decide

Use a forecast that reflects slower trading as well as your usual revenue. Ask your accountant to review the tax position and a finance adviser to explain the proposed loan.

• What will I pay in total under each option?
• Can I meet future tax obligations at the same time?
• Does the loan put property or personal assets at risk?
• What are the consequences if I miss a payment?
• Could direct ATO discussions or a remission request be appropriate?

Include the cost of using your own cash

Paying from business funds may avoid borrowing charges but leave a working-capital gap. Identify which essential payments would be affected and whether another facility would then be needed to cover them.

Compare options using both total dollars and minimum cash remaining through the period. An option with fewer fees can still be impractical if it leaves the business unable to meet payroll or current tax.

Why “ranked by total cost” is harder than it sounds

A genuine ranking of ATO repayment options by cost requires knowing your actual debt amount, the real GIC rate applying to your period, how long repayment will realistically take, and every fee attached to any alternative finance. Without those specifics, any ranking is a generalisation dressed up as advice. What this article can do is lay out the mechanics of each option clearly enough that you, with your accountant, can run the comparison on your own numbers.

It is also worth separating “cheapest in dollar terms” from “lowest risk for the business”. A slightly more expensive option that removes exposure to ATO recovery action or director penalty risk may be the right choice even if it is not the lowest number on a spreadsheet.

Option one: paying from existing business cash

Using cash on hand avoids borrowing costs entirely and is often the cheapest option in pure interest terms. The real cost is opportunity cost — what the business cannot do with that cash while it is gone, including covering payroll, buying stock, or absorbing a slow month. For businesses with genuine spare liquidity, this is usually the simplest and least expensive path. For businesses operating close to the edge, draining cash reserves to clear a tax debt can create the next cash-flow problem within weeks.

Option two: an ATO payment plan

A payment plan spreads the debt over time without introducing a third-party lender, but GIC generally continues to accrue on the outstanding balance throughout, and from 1 July 2025 that interest is not deductible. The total cost therefore depends heavily on how long the plan runs and the applicable GIC rate during that period — a longer plan at a higher rate can accumulate meaningfully more interest than a shorter one, even on the same starting balance.

This option avoids lender fees, security requirements and credit assessment, but it keeps the debt on the ATO’s books, with the recovery and director penalty considerations that implies if a payment is missed.

Option three: a secured business loan to clear the debt

Using a secured loan — against property or business assets — to pay the ATO in full can offer a lower interest rate than an unsecured facility, because the lender has collateral to fall back on. The trade-off is risk to the secured asset if repayments are not met, plus valuation, legal and establishment costs that need to be added to the comparison. This is also subject to the lender’s credit assessment and is not available to every business.

Option four: an unsecured business loan

Unsecured finance avoids putting a specific asset at direct risk but generally carries a higher interest rate to reflect the lender’s increased risk, and may still require a personal guarantee from directors. For businesses without significant unencumbered assets to offer as security, this may be the only lending path available, but it needs to be weighed honestly against the GIC cost of simply continuing a payment plan.

Option five: finance for businesses with credit history issues

Some businesses carrying an ATO debt also have an impaired credit history, which narrows the lender pool further. There are lenders who will consider applications from businesses with a less-than-perfect credit file, but terms are generally less favourable, and approval is never guaranteed. This option tends to sit at the higher-cost end of the comparison and should be assessed with full fee disclosure before committing.

Step by step: building your own cost comparison

Ranking options by cost only works if the comparison is built on your own figures. The steps below set out a simple sequence for putting a payment plan and a finance quote on the same footing before deciding between them.

• Step 1 — Confirm the exact ATO debt and the applicable GIC rate for your period.
• Step 2 — Model the total interest if the debt were repaid as a plan over your realistic timeframe.
• Step 3 — Get a written finance quote including every fee, not just the headline interest rate.
• Step 4 — Compare total cost over the same timeframe, not just the monthly repayment figure.
• Step 5 — Factor in security, personal guarantees and the consequences of default for each option.

Checklist: questions to ask before ranking options for your own business

A short set of direct questions, answered honestly, will usually tell you more about which option suits your business than a general ranking ever could.

• What is the exact outstanding balance, including any accrued GIC?
• How long would a payment plan realistically take to clear the debt?
• What fees, beyond interest, does any loan option carry?
• Does any option require security over property or a personal guarantee?
• What happens under each option if the business misses a repayment?

Questions owners ask

Is a loan always more expensive than an ATO payment plan? Not necessarily — it depends on the GIC rate, how long the plan would run, and the specific loan terms on offer. A shorter, well-priced loan can sometimes cost less in total than a long-running plan with ongoing GIC.

Does paying the ATO in full with a loan remove all risk? It removes the ATO debt and associated ATO recovery risk on that liability, but replaces it with a binding obligation to the lender, which carries its own consequences if not serviced.

Can I combine options, like using some cash and borrowing the rest? Yes, many businesses use a mix, paying down what they can from cash and financing the balance, which can reduce the total amount of interest paid overall.

Who can help me actually run these numbers? Your accountant can model the ATO side, and a finance broker can provide written loan quotes for comparison — use both together rather than relying on verbal estimates.

How GIC interacts with different trading patterns

Because GIC compounds daily on the outstanding balance, businesses with uneven income — construction firms waiting on milestone payments, hospitality and retail businesses with seasonal peaks, transport operators with lumpy fuel and maintenance costs — can find that interest accrues fastest exactly when cash is tightest and a lump-sum payment is hardest to make. Healthcare practices with steadier billing cycles may find it easier to make small, frequent payments that chip away at the balance interest accrues on. None of this changes the mechanics of GIC, but it is a useful lens for timing payments where you have some flexibility.

Questions worth raising with your accountant about GIC

Ask your accountant to confirm the current GIC rate applying to your debt, to explain how the 1 July 2025 deductibility change affects your specific tax position, and to help you model whether an early lump-sum payment or a remission request makes more sense given your cash position. Bringing a recent ATO statement and your own estimate of the balance to the meeting will generally produce a faster, more accurate answer than discussing the figures from memory.

What lenders look at if you are comparing a loan against ongoing GIC

If the GIC cost of a long plan is pushing you toward comparing a loan instead, lenders will typically want to see recent financial statements, current BAS lodgements, the ATO statement showing the GIC accrued to date, and a clear picture of trading history. Having these ready before you apply, and understanding that approval remains subject to individual lender assessment, generally makes for a smoother and more realistic comparison.

A 30/60/90-day approach to getting on top of a growing balance

If GIC has been accumulating faster than expected, a staged response can help. In the first 30 days, confirm the exact current balance and GIC rate, and discuss with your accountant whether a remission request is realistic. In the next 30 days, decide whether an early partial payment, a revised plan, or a finance quote makes the most sense, based on actual figures rather than assumptions. In the final 30 days, implement whichever path you choose and set a reminder to recheck the GIC rate the following quarter, since it is reviewed regularly and can change.

More than 40 options beyond the big banks — suitability comes first

Tax Debt Financing offers a discussion of more than 40 lender options beyond the big banks, including non-bank and specialist business finance providers. Different lenders may assess trading history, security and cash flow differently. Not all finance providers accept ATO debt as a funding purpose, and not every option will be available to your business.

A decline from a bank is context, not proof that another lender should approve the loan. Start with the amount needed, the verified liability and the cause of the shortfall. Then assess whether a proposed facility leaves room for payroll, suppliers and future tax. A wider choice only helps when the available terms match a sustainable business plan.

Compare the written terms, not an advertised repayment

Ask for an itemised proposal showing the amount advanced, interest calculation, compulsory fees, term and payment frequency. Confirm whether any fees are deducted from the advance: the amount received must still be sufficient to meet the intended payout. Understand any balloon payment, early repayment condition and consequences of default.

Read security and personal guarantee documents carefully with independent advice where appropriate. “Unsecured” does not necessarily mean no personal exposure or no security over business assets. A daily or weekly repayment can affect cash flow differently from a monthly amount, even where the total looks similar. Compare the whole obligation rather than a single headline rate.

• Verify how much will actually be available to pay the ATO.
• Include establishment, ongoing, broker and legal fees where applicable.
• Confirm guarantees, security and repayment frequency.
• Ask how the adviser is paid and what consent is required.

Keep the alternatives and next tax cycle in the decision

Compare the proposal with paying from available business funds and an ATO arrangement where available. Since 1 July 2025, GIC incurred is no longer deductible, but that does not establish the tax treatment or value of every loan. Ask your accountant to check any tax assumptions; compare actual costs before assuming savings.

Build the next BAS and super obligations into the forecast. If the business cannot make provision for new liabilities, refinancing the old balance may only postpone the problem. Seek insolvency or legal advice where needed, especially if there are enforcement notices. A loan application does not pause deadlines or guarantee settlement.