What is the General Interest Charge (GIC) for overdue ATO debt?

The General Interest Charge (GIC) is a penalty interest rate applied by the Australian Taxation Office (ATO) to overdue tax debts. According to the ATO, for the 2023-24 financial year, the GIC rate is 11.38% per annum. This charge accrues daily from the due date until the debt is paid in full, making prompt resolution crucial for tradies.

How does an ATO payment plan affect my business loan application?

An ATO payment plan can positively affect your business loan application by demonstrating proactive debt management. Lenders often view a formal, adhered-to payment arrangement more favourably than unmanaged arrears, as it shows commitment to resolving the debt. However, the business must still prove it can afford both the ATO instalments and the new loan repayments.

Can I use a business loan to pay off my ATO tax debt?

Yes, it is possible to use a business loan to pay off ATO tax debt, but this strategy requires careful consideration. According to financial advisors, consolidating high-interest ATO debt into a lower-interest business loan can improve cash flow. Lenders will assess your capacity to service the new loan, ensuring it doesn't create further financial strain on your trade business.

Can I get business finance if I have ATO tax debt or overdue BAS?

Skill level: General guidance
Time: Varies
Trade: Business & Equipment Finance
Updated: 3 November 2026

Can Australian tradies get business finance with ATO tax debt or overdue BAS?

Yes, it may still be possible to access business finance if you have ATO tax debt or overdue BAS, but it usually depends on the reason for the arrears, how recent they are, and whether the business is otherwise trading soundly. For many Australian small business owners, sole traders and contractors, the key issue is not just the debt itself, but how lenders view cash flow, tax compliance and the plan to get things back on track.

What key factors do lenders consider when assessing ATO tax debt for business finance?

ATO debt does not automatically rule you out. Some lenders will consider applications where there is existing tax debt or BAS overdue, especially if the business can show current income, viable cash flow and a clear plan to address the arrears. Others may require the ATO debt to be up to date, on a formal payment arrangement, or fully paid before settlement.

Overdue BAS is often treated as both a compliance and cash flow issue. Lenders may see unlodged or overdue BAS as a sign that financial records are not current, which makes it harder to verify turnover and GST obligations. In practice, being up to date with lodgements can materially improve how an application is assessed, even if tax debt still exists.

The type of finance matters. An unsecured business loan, secured equipment finance, debtor/invoice finance or a line of credit may each be assessed differently. For example, asset-backed lending can sometimes be easier to structure than unsecured funding, but suitability depends on the business, the asset, and the intended use of funds.

Lenders usually look at the whole picture, not just the ATO balance. They commonly assess recent bank statements, trading performance, existing debts, repayment conduct, time in business and whether there are any defaults or director-related issues. ATO debt is one factor among several.

Using finance to deal with tax debt needs care. In some cases, refinancing short-term pressure into a structured business facility may support cash flow. In others, it can simply move the problem if the underlying trading issues are not addressed. ASIC’s Moneysmart guidance and ATO material both reinforce the importance of understanding total costs, obligations and alternatives before taking on new debt.

What A Specialist Would Review For Your Situation

Whether the ATO debt is lodged, quantified and under arrangement. A specialist would look at whether BAS and returns are up to date, whether there is an active ATO payment plan, and how the debt arose in the first place.

Your current serviceability and business cash flow. This includes trading trends, margins, bank conduct, upcoming liabilities and whether the business can realistically support new repayments without worsening the position.

The right finance structure for the use of funds. They would weigh up whether equipment finance, a working capital facility, debtor finance or another structure is more appropriate, rather than treating every tax debt problem as a standard business loan request.

Security position and lender fit. Some lenders are more comfortable with tax debt scenarios than others, particularly where there is strong asset security, consistent contract income or clean recent trading evidence.

Documentation strength and timing. A specialist would identify what needs to be cleaned up first — such as BAS lodgements, ATO correspondence, accountant-prepared figures or bank statement explanations — before approaching lenders.

Common Costly Mistakes

Applying everywhere at once without fixing BAS lodgements or explaining the ATO debt properly.

Borrowing the wrong way — for example, using expensive short-term funding for a problem that needs a better-structured facility.

Ignoring the root cause of the tax debt, such as irregular cash flow, underquoted work or poor debtor collection.

Assuming an ATO payment plan and business finance are the same solution when they serve different purposes and need to be assessed together.

When To Get Professional Help

If you have overdue BAS, unlodged returns, an ATO payment arrangement, or urgent cash flow pressure, this is usually where DIY stops making sense. The way the application is positioned, documented and structured can materially affect which lenders may consider it and on what terms, so it is sensible to speak with a specialist before lodging multiple applications.

Talk To A Specialist

If you want to understand what options may be available with ATO debt or BAS arrears, the next step is to speak with a finance specialist who deals with these scenarios regularly. They can help you work through the lender requirements, likely documentation and structure options based on your circumstances — without promising outcomes that depend on lender criteria.

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Frequently Asked Questions

Can I get a business loan if I owe money to the ATO?

Possibly, yes. Having ATO debt does not automatically prevent approval, but lenders will usually want to understand the amount owing, whether lodgements are current, and how the debt is being managed. Your broader cash flow and repayment capacity are usually just as important as the tax debt itself.

Do I need to pay all overdue BAS before applying for finance?

Not always, but unlodged or overdue BAS can make an application harder because lenders often rely on BAS to help verify trading activity. In some cases, getting lodgements up to date or entering into an ATO arrangement can improve your position. What is required varies by lender and product.

Will lenders check if I have an ATO payment plan?

They may ask for evidence of any ATO payment arrangement as part of the application, along with recent statements or accountant confirmation. A formal arrangement can sometimes be viewed more favourably than unmanaged arrears, because it shows the debt has been acknowledged and is being addressed. It does not remove the need to show the business can also afford the new facility.

Is equipment finance easier to get than an unsecured business loan if I have tax debt?

Sometimes it can be, because the asset being funded may provide security to the lender. That said, lenders still assess affordability, business conduct and the overall risk profile. The best structure depends on what you are buying, how the business earns income, and whether the finance is solving a short-term issue or supporting a sustainable plan.

Can I use business finance to pay ATO debt?

In some situations, yes, but it needs to be approached carefully. Replacing one liability with another can help smooth cash flow, but only if the repayment structure is realistic and the underlying tax shortfall is not continuing to grow. The ATO and ASIC’s Moneysmart both provide useful guidance on understanding obligations and choosing the right support.

Important — General Information Only

This information is general in nature only and is not personal business or equipment finance advice. It does not take into account your objectives, financial situation or needs, and you should consider your own circumstances and seek advice from an appropriately licensed or registered professional before acting. Lending is subject to individual lender criteria and applicable responsible lending and conduct obligations, including relevant requirements under the National Consumer Credit Protection framework where applicable. For authoritative guidance, see ASIC and Moneysmart, and for current tax administration rules, lodgement obligations and ATO payment arrangements, refer to the ATO.

Frequently asked questions

Can I get a business loan if I owe money to the ATO?: Possibly, yes. Having ATO debt does not automatically prevent approval, but lenders will usually want to understand the amount owing, whether lodgements are current, and how the debt is being managed. Your broader cash flow and repayment capacity are usually just as important as the tax debt itself.
Do I need to pay all overdue BAS before applying for finance?: Not always, but unlodged or overdue BAS can make an application harder because lenders often rely on BAS to help verify trading activity. In some cases, getting lodgements up to date or entering into an ATO arrangement can improve your position. What is required varies by lender and product.
Will lenders check if I have an ATO payment plan?: They may ask for evidence of any ATO payment arrangement as part of the application, along with recent statements or accountant confirmation. A formal arrangement can sometimes be viewed more favourably than unmanaged arrears, because it shows the debt has been acknowledged and is being addressed. It does not remove the need to show the business can also afford the new facility.
Is equipment finance easier to get than an unsecured business loan if I have tax debt?: Sometimes it can be, because the asset being funded may provide security to the lender. That said, lenders still assess affordability, business conduct and the overall risk profile. The best structure depends on what you are buying, how the business earns income, and whether the finance is solving a short-term issue or supporting a sustainable plan.
Can I use business finance to pay ATO debt?: In some situations, yes, but it needs to be approached carefully. Replacing one liability with another can help smooth cash flow, but only if the repayment structure is realistic and the underlying tax shortfall is not continuing to grow. The ATO and ASIC’s Moneysmart both provide useful guidance on understanding obligations and choosing the right support.
What is the General Interest Charge (GIC) for overdue ATO debt?: The General Interest Charge (GIC) is a penalty interest rate applied by the Australian Taxation Office (ATO) to overdue tax debts. According to the ATO, for the 2023-24 financial year, the GIC rate is 11.38% per annum. This charge accrues daily from the due date until the debt is paid in full, making prompt resolution crucial for tradies.
How does an ATO payment plan affect my business loan application?: An ATO payment plan can positively affect your business loan application by demonstrating proactive debt management. Lenders often view a formal, adhered-to payment arrangement more favourably than unmanaged arrears, as it shows commitment to resolving the debt. However, the business must still prove it can afford both the ATO instalments and the new loan repayments.
Can I use a business loan to pay off my ATO tax debt?: Yes, it is possible to use a business loan to pay off ATO tax debt, but this strategy requires careful consideration. According to financial advisors, consolidating high-interest ATO debt into a lower-interest business loan can improve cash flow. Lenders will assess your capacity to service the new loan, ensuring it doesn't create further financial strain on your trade business.

Written by Capital, the Business & Equipment Finance specialist at QLD.Tools.