ATO payment plan
Spread the debt over instalments. The ATO notes general interest charge applies to amounts unpaid after the due date.
ATO debt guide
Got an ATO Debt Letter? What to Do This Week
A calm, day-by-day plan for business owners who have just opened a letter from the ATO about an overdue tax debt.
Take a breath
What should you do when an ATO debt letter arrives?
Few envelopes make a business owner's stomach drop like one from the ATO. Maybe it is a reminder about an overdue BAS balance, maybe it mentions firmer action, maybe it is addressed to you personally as a director. Whatever it says, the worst thing you can do is put it in a drawer and hope it goes away.
Tax debts are common in small business, especially after a hard year or a period of growth when GST and PAYG were spent on running costs. The ATO's own guidance is clear: if you are finding it hard to pay, contact it before the due date. Acting early keeps more options open.
This guide gives you a practical plan for the next five working days, from working out exactly what you owe and who to call, to deciding between an ATO payment plan and paying the debt out with a business loan. Each step is short, and most can be done from your phone between jobs.
When an ATO debt letter arrives, read it carefully and note the deadline, check the balance in ATO online services, call your accountant or BAS agent, and contact the ATO before the due date. Options include a payment plan, which the ATO says can often be set up online for debts of $200,000 or less, or paying the debt with a business loan.
Your options
Payment plan or pay it out?
Most businesses choose one of these routes, and the right one depends on the size of the debt and your cash flow.
Pay it out with a loan
Clear the debt in one hit using a business loan, then repay the lender on agreed terms. ATO debt is considered case by case.
A mix of both
Use funding to pay part of the debt and a payment plan for the rest, keeping cash flow manageable.
Day 1: What does your ATO letter actually say?
Read the whole letter slowly and write down four things: what type of debt it is, the amount, the date anything must happen by, and what the ATO says it may do next. Then log in to ATO online services, or ask your tax agent to, and confirm the balance matches. Letters can cross with payments, so check what has already been paid.
Take particular note if the letter is a director penalty notice. The ATO says directors can become personally liable for a company's unpaid PAYG withholding, GST and super guarantee charge, and that there are 21 days to take one of the options set out in the notice. If you receive one, call your accountant the same day.
- Type of debt (BAS, income tax, PAYG, super guarantee)
- Total amount owing and how it is made up
- Any deadline mentioned in the letter
- Whether the letter is addressed to you as a director
- Whether any lodgements are still outstanding
Day 2: Who should you call first?
Your accountant or BAS agent. They can see the account, explain the letter in context and often talk to the ATO for you, although you stay responsible for your own obligations. Ask them whether every lodgement is up to date. The ATO points out that lodging on time keeps your records current and gives you certainty about what you owe, even if you cannot pay yet.
Then contact the ATO yourself or through your agent, before any deadline in the letter. The ATO recommends getting in touch before the due date if you are finding it hard to pay.
Day 3: Can you set up an ATO payment plan?
Often, yes. According to the ATO, if you owe $200,000 or less you may be able to set up a payment plan through its online services, and businesses can use Online services for business. For larger debts, or if the online option is not available, you can call the ATO or have your registered tax or BAS agent arrange it. Income tax and activity statement debts need separate plans.
The ATO also offers a payment plan estimator to help you find instalments you can afford. Keep in mind that general interest charge applies to any amount not paid by the due date, so a plan that clears the debt sooner means less interest overall.
- Have your ABN and TFN ready
- Know the full amount owing for each separate debt
- Use the ATO payment plan estimator to test instalments
- Choose an amount you can genuinely keep up
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Day 4: Should you use a business loan to pay an ATO debt?
For some businesses, yes. Paying the debt out with a loan can make sense when the debt is large, when the ATO has signalled firmer action, when a payment plan's instalments would squeeze cash flow too hard, or when the debt is affecting your ability to win contracts or get credit elsewhere. The ATO notes that overdue business tax debts may in some cases be reported to credit reporting bureaus.
ATO debt business loans are assessed case by case. Trading businesses may access $5,000 to $500,000 unsecured, sized on turnover and bank statements. Larger debts are often better suited to a property-secured business loan of $20,000 to $5,000,000, where $20k to $250k is possible same day. Rates depend on security, term, risk and the lender, so compare the total cost with a payment plan.
What documents do lenders need for an ATO debt loan?
Lenders want to see the whole picture, so bring the ATO letter and a current statement from ATO online services, alongside the usual ID, ABN and six months of business bank statements. If you already have a payment plan, include its details and show whether instalments have been met.
Being upfront speeds everything up. An assessor who sees the debt clearly from the start can plan around it. Our document checklist lists the rest.
Day 5: How do you stop it happening again?
Once the debt is under control, open a separate bank account just for tax. Each week, move across the GST collected and the PAYG withheld from wages. When BAS time comes, the money is already sitting there. Ask your accountant to set up quarterly reminders and a quick review before each lodgement.
If cash flow is the root cause, our cash flow emergency checklist has simple steps to bring money in faster and avoid the next squeeze.
Need to clear an ATO debt quickly?
If paying the debt out is the right move, send your enquiry today. It takes about 60 seconds, there is no credit check when you first enquire, and your details are not passed around a crowd of lenders. A real person reviews your situation, so please include the debt amount and any payment plan accurately so we can match you first time.
Start the 60-second enquiry. Subject to lender approval, eligible applicants with documents ready can be cashed up as soon as tomorrow.
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Common questions
Got an ATO Debt Letter? What to Do This Week FAQs
Can I get a business loan with an ATO debt?
Yes, ATO debt is considered case by case. Being upfront about the amount and any payment plan helps lenders find the right option quickly.
Can I set up an ATO payment plan online?
The ATO says that if you owe $200,000 or less you may be able to set one up through its online services. Larger debts can be arranged by phone or through your tax agent.
Does the ATO charge interest on overdue debts?
Yes. The ATO states that general interest charge applies to any amount not paid by the due date.
What is a director penalty notice?
It is a notice that can make company directors personally liable for unpaid PAYG withholding, GST and super guarantee charge. The ATO allows 21 days to act on the options in the notice.
Is it better to pay the ATO with a loan or a payment plan?
It depends on the size of the debt, your cash flow and total cost. Compare both with your accountant before deciding.
Should I lodge my BAS even if I can't pay?
The ATO explains that lodging on time keeps your records current and gives certainty about what you owe, which helps you plan payment.
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Last reviewed: 24 October 2026
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