Business Loan to Pay Tax Debt in Australia Before June 2027

Yes, you can use a business loan to pay off ATO tax debt, and for many businesses it's now the cheaper option.

The ATO's general interest charge sits at 11.51% (1 October to December 2026), it compounds daily, and since 1 July 2025 it's no longer tax deductible. Business loan interest generally is.

The credit card ban delay gives you until 30 June 2027 to sort it out properly. Use it.

What actually happened with the ATO credit card ban?

The ATO announced it would stop accepting credit card payments for tax debts from the start of December 2026. Business groups pushed back hard, and the Treasurer stepped in. The government will temporarily fund the card fees, and the ATO will keep accepting cards until 30 June 2027.

The reaction I've heard from business owners since is relief. "Good, problem solved."

Wrong direction. Nothing has been solved. The deadline has moved, that's all.

Putting a BAS on a credit card was never a strategy. It's just a workaround, one that swaps a government debt for a card debt at a much higher rate. And from July next year, that workaround is gone.

Why is ATO debt more expensive than it looks?

Most owners treat the ATO as a patient lender. It used to be. It isn't anymore.

The interest is high and it compounds. The general interest charge is the 90-day bank bill rate plus 7%, calculated daily. At 11.51%, a $150,000 tax debt costs you more than $17,000 a year in interest alone.

You can't claim it. Since 1 July 2025, the general interest charge isn't deductible. For a company paying 25% tax, 11.51% of non-deductible interest is roughly the same as paying 15% on a loan you can claim. Most business loans cost well under that.

The ATO is enforcing again. Payment plans are harder to get and less forgiving when you miss one. Director penalty notices and garnishees are being used more often. Business tax debts over $100,000 that are more than 90 days overdue can be reported to the credit bureaus, and once that's on your file, lenders see it.

It's a warning sign. CreditorWatch found businesses with ATO debts over $100,000 recorded an insolvency rate of 21.9% over the past year (@2026). Lenders read those numbers too.

When does a business loan to pay tax debt make sense?

Refinancing ATO debt makes sense when the debt came from a one-off event and the business is trading profitably now. A big growth year where tax caught up with you. A bad debt that wiped out a quarter. A large customer who paid 90 days late. Those are timing problems, and a loan with a fixed term and a lower rate fixes timing problems.

It makes sense when:

The business is profitable today, not just last year
The loan repayments fit comfortably inside your monthly cash flow
The loan rate is lower than the general interest charge, after tax
You'll keep paying current tax on time while you repay the old debt

It doesn't make sense when the tax debt is a symptom. If GST and PAYG withholding are funding wages and suppliers every quarter, a loan doesn't fix the business. It just moves the problem to a lender, and the ATO debt comes back within a year. That calls for a different conversation, about margins, pricing or restructuring, before any finance. Here's what's really behind a cash flow gap.

What will a lender want to see?

Most banks won't touch a business with ATO debt. Specialist and non-bank lenders will, and some built products specifically for it. What they all want is the full picture, upfront.

Lodgements up to date. This is non-negotiable. Unlodged BAS or tax returns stop an application before it starts.
Your ATO portal statement. The current balance, how it built up and any payment plan history.
Recent financials and BAS. Proof the business is trading profitably now.
A clear explanation. How the debt happened and why it won't happen again. One page, in plain English.

The options range from unsecured business loans, which are faster but cost more, to loans secured against property, which are cheaper and larger. If slow-paying customers caused the debt, invoice finance can fix the cash cycle that created it. More on better funding options for ATO debt.

The mistake I see most is owners hiding the ATO debt and hoping it won't come up. It will. I sat on credit committees for years, and an undisclosed debt found halfway through assessment ends the deal. A disclosed debt with a sensible plan often gets approved. Here's why businesses still get told no.

Why act now instead of in June 2027?

Because your options shrink the longer the debt sits there.

Today, you might have a current payment plan, clean credit and lodgements up to date. Six months from now, you might have a breached plan, a tax default on your credit file and a director penalty notice in the mail. Same business, much harder application.

And June is the worst month to be doing this. Every business trying to clear its card-funded tax debt will be applying at the same time, right when lenders are busiest with end-of-financial-year equipment deals.

If you're carrying ATO debt, find out where you stand now. Take the PFITZ Bank Readiness Score or book a time with us. We'll tell you plainly whether refinancing makes sense, or whether something else needs fixing first.