Before borrowing, make sure the repayments solve more than today’s pressure.

A decision checklist for business owners

Work through these points with your accountant and finance adviser. If you cannot answer a key question, pause before signing.

• Have I verified the debt and notice deadlines?
• Can the business afford new repayments and future tax bills?
• Do I understand the total cost, security and guarantees?
• Have I compared an ATO arrangement and other available responses?
• Have I obtained legal or insolvency advice where needed?

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?

Write down a reason to proceed — and a reason to pause

A useful reason to proceed is a sustainable repayment structure supported by the business’s actual receipts. Urgency alone is not enough. Write down the assumptions that would have to remain true for the loan to work.

Pause if repayment depends on uncertain refinancing, an unconfirmed property sale or trading growth with no supporting evidence. Have your accountant and legal adviser assess those risks before signing.

The question behind the question

Owners rarely ask “should I borrow to pay the ATO” in the abstract — they ask it at 11pm after another reminder letter, wondering whether taking on new debt to clear old debt is sensible or just moving the problem sideways. There is no universal answer. Whether borrowing makes sense depends on the cost of the alternative, the business’s capacity to service a new repayment, and what happens if trading conditions do not improve as hoped.

This checklist is designed to slow that decision down just enough to make it a considered one, with your accountant involved, rather than a reaction to the most recent letter.

Question one: what does doing nothing actually cost?

Before comparing loan quotes, establish the real cost of leaving the ATO debt as is — continuing GIC, the risk of recovery action, and for company directors, potential exposure under the director penalty regime for certain unpaid liabilities. A loan that looks expensive in isolation can look more reasonable once compared against a realistic continuation of the status quo, including the interest you would otherwise keep accruing.

Question two: can the business genuinely service a new repayment?

This is the single most important question, and the one most often answered optimistically rather than realistically. A loan repayment is a fixed, binding commitment, generally due regardless of how trade performs that month. Run the repayment against a conservative — not best-case — cash-flow forecast, including a weaker trading period, before assuming the business can absorb it comfortably.

If the honest answer is that the business can only service the repayment in good months, that is a signal to look closer at whether borrowing is the right tool, or whether the underlying trading position needs addressing first.

Question three: what security or guarantee is actually required?

Secured finance may offer a lower rate but puts a specific asset — commonly property or business equipment — at risk if repayments are not met. Unsecured finance avoids that specific asset risk but often carries a higher rate and may still require a personal guarantee from directors, which exposes personal assets in the event of default. Understand exactly what is being put at risk before signing, not after.

Question four: have you actually compared total cost, not monthly repayment?

A longer loan term can produce a smaller monthly repayment while costing more overall once interest and fees are totalled. Ask for a full, written breakdown of every fee — establishment, ongoing, and any early repayment costs — before comparing it against the realistic GIC cost of a payment plan over the same period.

Step by step: working through the decision with your accountant

A borrowing decision made jointly with your accountant, using real figures, tends to hold up better under pressure than one made alone from a single quote. The sequence below is a reasonable way to structure that conversation.

• Step 1 — List the exact ATO debt, current GIC rate, and realistic plan timeframe.
• Step 2 — Obtain a specific, written loan quote with all fees disclosed.
• Step 3 — Run both scenarios against a conservative cash-flow forecast.
• Step 4 — Confirm what security or guarantee the loan requires and what happens on default.
• Step 5 — Make the decision with your accountant, not under time pressure from a single reminder letter.

Hypothetical: a retailer weighing a loan against a long plan

Picture a hypothetical retail business owing a mid-sized GST debt, facing a choice between an 18-month ATO payment plan with ongoing GIC, or a 12-month business loan with a fixed rate and an establishment fee. After comparing total cost and checking the repayment against a conservative sales forecast, the owner found the shorter loan term reduced total interest paid, but only because the business could comfortably absorb the higher monthly repayment without affecting stock purchasing.

This is a constructed example for illustration only, not a client case, a guarantee, or a recommendation that a loan is generally preferable — the right answer depends entirely on the business’s own numbers.

Checklist: signs borrowing may not be the right move yet

If several of these apply, it is worth pausing and seeking independent advice, including from a registered liquidator or SBR practitioner, before committing to new debt.

• You cannot service the proposed repayment without relying on an optimistic sales forecast.
• You have not yet explored whether the ATO would accept a variation to an existing plan.
• You are unsure whether the underlying business is viable even without the ATO debt.
• You have not compared more than one finance quote.
• You have not discussed the decision with your accountant.

Questions owners ask

Is it ever better to let the ATO debt sit rather than borrow? Sometimes — if the business can realistically manage a payment plan and GIC without jeopardising operations, borrowing may add cost and risk without clear benefit. Each case depends on the specific numbers.

Will borrowing affect my ability to get other finance later? Taking on new debt changes the business’s overall position and may be relevant to future lending decisions, which is worth discussing with a broker or accountant before committing.

Do I need a personal guarantee for every ATO debt loan? Not necessarily, but many unsecured facilities and some secured ones still require a director guarantee — always confirm this specifically with the lender before proceeding.

What if my accountant and a lender give different advice? Your accountant typically focuses on tax and overall financial position, while a lender focuses on the specific finance product; it is reasonable to seek both views and weigh them together rather than relying on just one.

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.