Paying an ATO debt with a private secured loan

Tax debt is the most common reason Australian business owners come to a private lender. It builds quietly: a BAS paid late, a quarter skipped to pay wages, an assessment bigger than expected. Then the letters change tone. Here’s how a private secured loan fits, and when it doesn’t.

The ATO escalation path

The ATO usually starts by working with you, but if a debt isn’t managed it has strong tools. Knowing where you are on this path tells you how urgent things are.

Stage	What it means
Reminder letters and calls	The debt is overdue and the ATO wants to talk
Intent to disclose	If at least $100,000 has been overdue more than 90 days and you’re not engaging, the ATO can report it to credit bureaus after a 28-day notice
Garnishee notice	The ATO can direct your bank, customers or others who owe you money to pay the ATO instead
Director penalty notice	Directors can become personally liable for PAYG withholding, GST and super guarantee charge, with 21 days to act
Legal recovery	Court action, a statutory demand or winding-up proceedings

If you’ve received a director penalty notice, go straight to that page. The 21-day clock is strict.

When a loan beats a payment plan

A payment plan is often the cheapest route, and we’ll say so. A private secured loan tends to make more sense when:

• the ATO won’t agree to a plan, or wants instalments the business can’t carry
• interest charges on the debt are mounting and aren’t deductible
• credit reporting would damage relationships with suppliers and lenders
• a garnishee is draining the account the business runs on
• directors face personal liability through a DPN
• you need a clean ATO position to win a contract or refinance with a bank

How the loan is set up

The lender will want an up-to-date ATO statement showing the full balance, including any lodgements still to come. At settlement, funds are usually paid straight to the ATO using your payment reference, so everyone knows the debt is cleared.

Typical structures are a caveat loan for speed and modest amounts, or a second mortgage for larger debts and longer terms.

The exit: how the loan gets repaid

A lender will ask how the loan is repaid. Common answers in tax debt cases:

1. Refinance to a bank once returns are lodged and the ATO account is clear
2. Sale of a property or other asset that was already planned
3. Trading income over a defined period, with interest paid monthly
4. A large incoming payment, such as a contract milestone or insurance claim

Be realistic. If the business can’t currently pay its taxes as they fall due, a loan alone won’t fix that. Speak to your accountant about the underlying cash flow too.

Don’t forget the lodgements

Lenders and the ATO both care about lodgement. If returns or BAS are outstanding, the debt figure may change once they’re lodged, and the ATO may have raised estimates. Get your accountant to bring lodgements up to date, or at least give a firm estimate, before you settle a loan, so you borrow the right amount.

A worked example: closing an ATO debt before it went public

A Brisbane signage company owed the ATO $160,000 in GST and income tax, more than 90 days overdue. The ATO had written to say it might report the debt to credit reporting bureaus, which would damage the company’s supplier accounts and trade terms.

The director owned an investment house in Wynnum. A private lender advanced $175,000 on a second mortgage, settled in five business days, and the ATO balance was paid in full before the reporting date. The company kept its supplier terms, and its accountant brought every outstanding lodgement up to date in the same month.

The loan ran for twelve months, during which the business set aside GST in a separate account each week. It then refinanced the second mortgage into the investment property’s main loan.

Questions to settle before you borrow

• Are all lodgements up to date, so the debt figure won’t change?
• Has the ATO issued a DPN or garnishee notice, adding urgency?
• Would paying part now and agreeing a plan for the rest reduce the loan size?

Clear the debt and get back to business

Tell us how much is owed, where you are on the escalation path, the property you can offer and how you’d repay. We’ll tell you plainly whether a loan makes sense compared with a payment plan. There’s no credit check when you first enquire, and we don’t pass your details to a string of lenders.

Please give accurate figures, including any lodgements still outstanding, so the loan clears the whole debt the first time. Start your enquiry, or read about payroll and super pressure and then contact us.