Business & equipment finance
Dealing with a tax debt: understanding your options
26 September 2026 · 5 min read
Whether it's an income tax assessment you didn't budget for or a BAS that landed at a tough time, a tax bill you can't pay in full is stressful. The worst thing you can do is ignore it. Here's a general overview of the options, and a recent rule change business owners should know about.
Why acting early matters
The ATO charges interest on tax that isn't paid by its due date, and that interest compounds daily. Penalties can also apply in some situations. The longer a debt sits, the bigger it gets, so it pays to deal with it as soon as you know about it.
A change to ATO interest charges
From 1 July 2025, the general interest charge (GIC) and shortfall interest charge (SIC) incurred on or after that date are no longer tax deductible, even if the underlying debt relates to an earlier year. GIC and SIC incurred before 1 July 2025 can still be deductible for the 2024–25 and earlier income years. This means carrying a tax debt now effectively costs more than it used to. Your accountant can explain how this applies to you.
Option 1: an ATO payment plan
If you can't pay in full, the ATO may let you set up a payment plan, which can be arranged online or through your registered tax agent. Interest generally keeps accruing while you pay the debt off, so paying as much as you can, as early as you can, reduces the cost. Talking to the ATO early is usually better than waiting.
Option 2: using finance to pay the debt
Some individuals and businesses choose to pay the ATO using finance instead, such as a personal loan for an individual, or an unsecured business loan or overdraft for a business. Whether that makes sense depends on the rate and fees you'd pay, the loan term, whether any interest on the loan is deductible for you, and your ability to meet the repayments.
Finance isn't automatically cheaper or better than an ATO arrangement. Compare the total cost of each option, and get your accountant's view on the tax side before deciding.
Heading off the next one
Once the immediate bill is handled, it's worth building a buffer. Many business owners set aside GST, PAYG withholding and super in a separate account as money comes in, so the funds are there when the next payment falls due. Your accountant can help you estimate what to put aside.
General information only
This article is general information only. It does not take your personal circumstances into account and is not personal credit, legal, tax or financial advice. Tax rules can change. For how the rules apply to you, speak with your accountant or registered tax agent, or check ato.gov.au. All finance is subject to lender assessment and approval.
The Finsterl view
If you've weighed up your options with your accountant and want to know whether finance could help with a tax bill, call the Finsterl Finance team on 1300 508 827 or send us an enquiry. All finance is subject to lender assessment, eligibility criteria, terms and conditions.
Related finance
All finance is subject to lender assessment, eligibility criteria, terms and conditions. Rates and fees depend on individual circumstances.
Run the numbers
Estimate your repayments
Estimates only, but a good place to start a real conversation.
A balloon lowers the monthly repayment but increases total interest paid.
Estimated monthly repayment
$933.91
$215.68 per week equivalent
Amount financed
$45,000
Balloon at end of term
$0
Total of repayments (incl. balloon)
$56,034
Excludes lender and broker fees, which vary by lender and product.
This calculator provides estimates only and does not constitute financial advice, a finance approval or a guarantee of business performance. Actual repayments, costs and business outcomes may differ.
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