Quick answer
Yes, a business loan is often possible while you're on an ATO payment plan. Banks may still decline because the tax debt is live, but specialist lenders see a plan you've kept to as a sign of good faith. Many owners either borrow alongside the plan for another purpose or refinance the remaining balance into the loan, which stops general interest charge building and frees up the monthly instalment.
Key points
- Businesses owing $200,000 or less may set up an ATO payment plan online.
- General interest charge keeps accruing on a plan, and it's no longer tax deductible.
- A kept plan is good evidence; a missed plan is a red flag.
- Refinancing the balance can end the plan and simplify cash flow.
- Online plans
- Up to $200,000 owed
- GIC on plans
- Keeps accruing
- To enquire
- No credit check
Setting up a payment plan with the ATO is often the responsible thing to do. It stops the letters, shows good faith and gives the business breathing room. Then you go to the bank for equipment finance or a working-capital facility, and the plan you’re proud of keeping becomes the reason you’re declined.
It’s a frustrating contradiction, but it’s common. The good news is that specialist lenders read a payment plan very differently.
Why does a payment plan still worry banks?
To a bank, a payment plan means the business owes tax it couldn’t pay on time and still owes a chunk of it. The ATO remains a creditor with strong powers, and if the plan fails, collection action can resume. Some banks decline any application with an active ATO balance. Others will consider it only once the plan has run cleanly for a long stretch.
How do specialist lenders read an ATO payment plan?
They separate two kinds of plan:
| Plan history | How it tends to read |
|---|---|
| Set up promptly, every instalment paid | Evidence you deal with problems. Often a positive |
| Set up after enforcement letters, mostly kept | Workable, with an explanation of what caused the arrears |
| Several plans started and defaulted | A pattern. Lenders want the whole balance cleared by the loan |
| Plan kept, but new debts piling up beside it | Concerning. Lenders will look hard at current cash flow |
A clean plan is proof of exactly what lenders care about: when things went wrong, you kept your word.
Should the loan pay the plan out?
Sometimes it makes sense, sometimes it doesn’t. The two main reasons to refinance a plan:
- Cost. The ATO says general interest charge continues to apply to payment plans, and paying faster reduces it. From 1 July 2025, GIC is no longer tax deductible, so the after-tax cost of carrying ATO debt has risen. Our guide on ATO interest no longer being deductible explains how to compare.
- Cash flow and certainty. A loan may spread repayments differently, and it removes the ATO as a creditor, which some owners find worth a great deal.
Reasons to keep the plan: it’s nearly finished, the balance is small, or the loan you need is for something else and your lender is comfortable with the plan running alongside.
Property-secured loans from $20,000 to $5,000,000 can pay the ATO directly at settlement. Unsecured and cash-flow options, typically $5,000 to $500,000 and sized on turnover and bank statements, can suit smaller balances. To see what fits your plan, tell us about it in a 60-second enquiry. There’s no credit check when you first enquire.
What if the plan is about to fail?
Act before the missed instalment, not after. The ATO’s advice for anyone who can’t pay on time is to get in touch early. If a plan is cancelled, collection action can restart, which can include garnishee notices and legal steps. For larger debts, disengaging can also lead to the debt being reported to credit bureaus: the ATO can disclose business tax debts where at least $100,000 is overdue by more than 90 days and the business isn’t engaging, after giving 28 days’ notice (ATO disclosure of business tax debts). A compliant payment plan counts as engaging.
If you can see the plan slipping, a refinance while the plan is still current is a much stronger file than one after it has been cancelled. The guide on ATO debt and your credit report explains the reporting rules in detail.
How do I set up or check a plan?
The ATO says businesses that owe $200,000 or less may be able to set up a plan through Online services for business, under Accounts and payments. Larger debts, or plans that need more flexibility, usually involve talking to the ATO directly, often through your tax agent. Keep a copy of the plan terms and your payment history: lenders will ask for both.
Illustrative example: refinancing a plan to fund growth
Illustrative only, not a real client. An electrical contractor in Newcastle has been on an ATO payment plan for eight months after a slow winter, and hasn’t missed an instalment. He wins a large commercial contract and needs working capital for materials and two extra staff. The bank declines while the plan is active.
A specialist lender offers a second mortgage over his home, pays the remaining ATO balance at settlement and provides the working capital in the same loan. His cash flow improves because the plan’s instalment disappears, and he has one lender to deal with while the contract runs.
What else will the lender look at?
A payment plan rarely travels alone. Lenders will check that BAS and returns are lodged, because a plan sitting on top of unassessed periods can grow unexpectedly. If lodgements are behind, see loans with overdue lodgements. They’ll also look at whether the plan was triggered by a one-off event or by cash flow that’s regularly too tight. If it’s the second, a revolving facility can help smooth the lumpy months; our page on lines of credit for difficult files explains how.
Kept your plan? Let’s make it count
A kept payment plan tells a good story, and we’ll make sure the lender hears it. The enquiry is quick, roughly sixty seconds, and there’s no credit check when you first enquire. We match your file to one lender rather than broadcasting it, and a human being, not a bot, calls to talk it over.
Please include the plan balance, the instalment and how long it’s been running. Accurate answers mean we can match you properly the first time. See if you qualify →
Frequently asked questions
Does being on an ATO payment plan show on my credit report?
A payment plan itself isn't a default. But if a business with $100,000 or more overdue for over 90 days stops engaging with the ATO, the debt can be reported to credit bureaus. A plan you're complying with counts as engaging.
Will a lender want me to pay off the plan with the loan?
Not always. If the loan is for another purpose, some lenders are comfortable with a well-kept plan continuing. Others prefer to clear it so the ATO is no longer a creditor. It depends on the lender and the size of the balance.
What happens if I default on my ATO payment plan?
The ATO can cancel the plan and resume collection action, which may include garnishee notices or legal action. If you can see a missed instalment coming, it's better to talk to the ATO and look at refinancing before it happens.
Is it cheaper to stay on the plan or refinance?
It depends on your file. Compare the full cost of the loan with the GIC you'd pay over the rest of the plan, remembering GIC isn't deductible. Also weigh the cash-flow difference and the value of removing the ATO as a creditor.