Separate catching up from staying up to date
GST and PAYG withholding arrears can build when money intended for tax is used to bridge operating costs. A business loan may help settle an existing liability, but it needs to sit alongside a plan for future lodgements and payments.
Ask your accountant to confirm the liability and that lodgements are up to date. Some company liabilities can create director penalty exposure. Do not treat finance as a substitute for responding to a notice or obtaining legal advice.
What to have ready
An accurate statement of account makes the funding discussion more useful. Where a notice has been issued, share the notice and its dates with your advisers immediately.
- ATO statement and current BAS liabilities.
- Recent bank statements and financial information.
- Details of any existing payment arrangement.
- A cash-flow forecast that includes the next BAS cycle.
What a GST, BAS or PAYG debt actually means
GST, BAS and PAYG withholding are amounts collected on the ATO’s behalf, not business income. When cash flow is tight, it is tempting to use that money to pay wages or suppliers and “catch up” next quarter. The debt grows because the next BAS adds to the one before it, and general interest charge (GIC) can accrue on the unpaid balance. From 1 July 2025, GIC is no longer tax-deductible, which increases the real cost of leaving a BAS debt unpaid.
The urgency depends on how far behind lodgements are and whether the ATO has already issued a notice. A single overdue BAS is a different conversation to several quarters of arrears with a director penalty notice on the horizon.
Call your accountant before you call a lender
Before exploring finance, your accountant should confirm the exact liability, check that lodgements are current, and identify any director penalty exposure. Unpaid GST and PAYG withholding can expose directors personally in some circumstances, so this is not a step to skip.
If a notice has already been issued, a qualified lawyer should review it alongside your accountant. Finance can sit behind that advice, but it should never replace it or be used to avoid making the phone call.
Where finance may fit — and where it may not
Business finance can be used to pay an eligible BAS or PAYG debt in full, turning several overdue amounts into one structured repayment. This can suit a business with genuine trading capacity that simply fell behind during a slow period.
It is unlikely to be the right answer if the underlying trading position cannot support both loan repayments and the next BAS cycle. In that case, a conversation with your accountant about restructuring, or with the ATO about a payment arrangement, may be more appropriate than adding another repayment.
What lenders look at, and what to prepare
Lenders assessing GST and PAYG debt finance generally want to understand the age and size of the debt, your lodgement history, recent trading performance and whether the shortfall was a one-off or a recurring pattern.
- Current ATO statement of account showing GST and PAYG balances
- Evidence that recent BAS lodgements are up to date
- Recent business bank statements
- A cash-flow forecast covering the next BAS cycle
- Details of any existing ATO payment arrangement
A hypothetical example
Hypothetical only: a trades business owes a combined $60,000 across two overdue BAS periods after a slow quarter. Lodgements are current and trading has since picked up. The owner discusses the figures with their accountant, confirms no director penalty notice has issued, and then explores whether a business loan to clear the $60,000 would leave manageable repayments alongside the next BAS. These numbers are illustrative only — your own position will differ and no outcome, rate or approval is implied.
How our tax debt finance team works with you
Our tax debt finance team is led by Kevin Knight, our Principal Finance Broker and MFAA Accredited Finance Broker with more than 20 years in Australian banking. We review your GST and PAYG debt scenario, ask about your lodgement position and talk through whether finance is a reasonable fit alongside your accountant’s advice — without pressure to borrow if it does not stack up.
This conversation is general in nature and does not replace the tax or legal advice you have already received; it simply clarifies whether the finance piece is realistic for your business.
This finance conversation is general information only and sits alongside, not in place of, the legal and tax advice guiding your response to the notice.
As with every scenario discussed here, this is general information only, and the ATO’s own processes determine whether and how a notice is varied or released.
This conversation is general information only; the legal strategy for responding to the demand must come from your own qualified lawyer.
Common mistakes to avoid
Owners often wait until several BAS periods have stacked up before seeking advice, which narrows the options available. Others assume a loan automatically fixes the cash-flow gap that caused the debt in the first place, without addressing the underlying trading issue. It is also a mistake to ignore a notice while waiting on a finance decision — the two should run in parallel, with legal or accounting advice always taking the lead.
Some employers also wait for a quiet trading period before dealing with an SGC liability, not realising that the charge continues to apply regardless of how busy or quiet the business currently is.
It is also worth noting that paying only part of the relevant liability may not resolve a notice in the way a director expects, which is another reason the response must be guided by a lawyer rather than assumptions about what finance can achieve.
It also pays to communicate proactively with affected customers or your bank, since an unexplained redirection of funds can damage a business relationship if it is not addressed openly.
Some directors also focus solely on raising funds to pay the demand without checking whether the broader financial position supports ongoing trading, which a lawyer and accountant can help assess together.
Some directors also mistakenly believe a verbal arrangement with the ATO changes the statutory deadline, when in fact only the matters your lawyer identifies can affect that timeframe.
Owners sometimes also forget to check whether other accounts or customers could be affected by a similarly worded notice, leaving a second disruption unaddressed.
It is also worth remembering that informal assurances from the ATO about “working something out” do not replace the formal legal steps your lawyer may recommend.
Treating the charge as optional until the ATO follows up is another common error, when early engagement generally leads to a smoother outcome for both the business and its employees.
Questions owners ask
- Can I borrow to pay GST and PAYG debt even if I am behind on lodgements? — Possibly, but most lenders want current lodgements, so this is usually the first thing to fix with your accountant.
- Does paying off the ATO with a loan stop GIC? — It stops GIC on the amount repaid, but the loan then carries its own interest and fees, which you should compare in full.
- Will a loan prevent a director penalty notice? — Not on its own. Only paying, lodging or the ATO’s own processes affect penalty exposure, so get legal advice if a notice is a risk.
- What if my accountant says borrowing is not appropriate? — Their advice on viability and tax position should take priority; we can still discuss the finance side for your records.
Key takeaway
An overdue BAS debt is manageable when it is addressed early: confirm the exact liability with your accountant, understand any notice deadlines with a lawyer if needed, and only then assess whether a structured loan improves your position. Finance is one option among several and is always subject to lender approval, eligibility, terms and fees.
Super guarantee obligations exist to protect your employees’ retirement savings, so treat any shortfall as a priority item rather than something to manage around other bills.
Acting within hours rather than days can materially change the options available, which is why the first call after receiving a DPN should always be to a lawyer.
Because a garnishee notice can move quickly from notice to effect, early contact with the ATO is usually more valuable than waiting to see how a finance application unfolds.
Because the consequences of an unanswered statutory demand are so serious, the legal response should always lead, with finance considered only once that advice is in hand.
Treat the first 24 hours after receiving a garnishee notice as the most important window for getting clear, accurate information.
Keep exploring
Related reading and services that may help as you weigh up your options.
