Tax debt loans are short-term loans to help businesses pay any outstanding or overdue debts to the Australian Taxation Office (ATO). They’re flexible to the needs of small and medium businesses, with a wide borrowing range (depending on your business’ turnover) and varied term lengths. However, these will also vary based on the type of tax debt loan you take out.
What tax debt loan options are available to my business?
There are several options available for tax debt loans in Australia:
Unsecured business loans
These are the most common for SMEs. Unsecured business loans don’t require any collateral, with lenders basing their approval on the strength of your business. These loans can start from as little as $5,000 and can reach up to $250,000 to $300,000 at the higher end. Unsecured loans are often quicker to approve than secured loans, sometimes within a matter of hours of applying.
However, if your business hasn’t been running for a long time, lenders may only be willing to lend a small amount over a very short term, such as one to three months. You may be required to provide a personal guarantee in such situations. These loans also come with higher interest rates and fees than secured loans.
Secured business loans
With a secured business loan, you can make use of a business asset like equipment or property as collateral. This can potentially expand your borrowing power into the millions of dollars (as long as your business can afford it).
Like unsecured loans, these can be used however you wish. This means you could take out a loan to cover your tax debt and clear other debts at the same time. It’s worth noting that these may take longer to process, especially for larger sums.
Business line of credit/overdraft
Lines of credit and business overdrafts aren’t as common when it comes to dealing with tax debts. However, if the debt is only relatively small and you already have one of these open, it may be a convenient way to clear it. Because of the higher rates and fees associated with these types of finance, you should only use one if you’re confident that you’ll be paying off within a short period.
Because some lines of credit and overdrafts come with lower caps of $50,000 to $100,000, they may not be suitable for larger tax debts.
Invoice finance
If you’re a business that deals in invoicing clients and the amount you’re owed exceeds your tax debt, this could also be an option. Invoice financing, unlike the other options here, doesn’t require any money to be borrowed. Instead, you’re paid anywhere between 85% and 95% of your outstanding invoices’ value, with the remainder to come once the invoices are paid (minus fees from your financier).
Why apply for a business loan with Savvy?
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Business tax debt changes: 2025
The Australian Government has removed the ability to deduct income tax interest on ATO debts, which comes into effect on 1 July 2025. Any general interest charge (GIC) or shortfall interest charge (SIC) incurred after this date is not tax-deductible. However, interest incurred up to 30 June is still claimable.
What this means for businesses is that the longer their tax debt remains outstanding, the more expensive it’ll become. There’s now a greater time and financial pressure on SMEs to clear their tax debts before the GIC or SIC on those debts becomes too much to handle. It’s essential that you factor this change into your financial planning for the 2025-26 financial year and beyond.
What tax debts can I cover with a business loan?
Lenders will still consider the nature of your debt to the ATO when assessing your business loan application. Here are some different situations and their likelihood of approval for a tax debt loan:
- Error in calculating taxes: if your accountants have made a one-time error when preparing your BAS or tax return, lenders will generally be more receptive to your situation. They should see that this isn’t an error made by you.
- Capital Gains Tax (CGT) debt: if you’ve incurred a tax debt due to profit made from the sale of property, lenders may be more likely to approve your tax debt loan. Property sales are very infrequent for most businesses, so they’ll usually be seen as a once-off.
- Rapid business growth: if your business experiences unexpectedly rapid growth and is forced to exhaust cash flow reserves to keep up, you may find it tricky to pay your tax debt. As long as you can show that you’re equipped to adjust to this growth, lenders can approve your application.
- Your business is stable: if you’ve been running your business for a while and its revenue has been positive and consistent, your tax debt loan application is more likely to be successful than that of a new business that hasn’t had much time to settle.
- Tax return not submitted: if the reason you have a tax debt is because your return wasn’t lodged, this may be more of an issue for lenders. Failure to complete this step could indicate to your lender that you’re less dependable.
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Does the ATO offer payment plans for overdue tax debt?
Yes – an alternative to taking out a loan is agreeing a payment plan with the ATO. This plan will be set out to help you clear your debt in the shortest possible time and doesn’t involve borrowing any money. For tax debts of $200,000 or less, you may have the option to set up your payment plan online or the ATO’s self-help phone line. However, for debts over $200,000, you’ll need to contact the ATO directly.
Interest will still apply to your debt. As of Q2 2025 (April to June), the annual GIC rate is 11.17% p.a. However, some businesses may qualify for a 12-month interest-free arrangement. You’ll have to meet the following criteria to be eligible:
- Your business’ annual turnover is under $2 million
- Your business has a good history of paying debts and lodging returns and statements, which means one or no payment plan defaults within the last 12 months and no outstanding activity statement lodgements
- Your business owes up to $50,000 from an overdue activity statement for up to 12 months
- Your business isn’t able to get a loan elsewhere
- You can show that your business will remain viable into the future
How to apply for a tax debt loan through Savvy
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Complete our online form
Start by completing our online application. This tells us about you and your business and the loan you’re after.
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Submit any further documents we need
We may need additional documents to verify your identity and your business’ turnover (as well as evidence of your tax debt).
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Discuss your finance options with a Savvy consultant
Your consultant will compare offers from our partnered lenders to find the best available deal for your business and give you a call to discuss your situation.
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Have your application prepared and submitted
Once you give us the all-clear, we’ll put together your formal application and submit it to your lender. We’ll keep you in the loop during this process.
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Receive formal approval and sign off on the deal
We’ll send through all the documents for you to sign upon formal approval. After that’s done, the funds can be sent to your nominated account and you can clear your tax debt.
Tax debt loan eligibility and documentation
Eligibility
- You must be at least 18 years of age
- You must be an Australian citizen, permanent resident or eligible visa holder
- You must have an ABN registered in your name
- Your business loan funds must be used at least 51% for commercial purposes
- You must meet your lender’s minimum personal and business credit score requirements
- The reason for your business’ tax debt must be acceptable
Documents
- Personal contact information such as your full name, date of birth, address and contact details
- ID (such as your driver’s licence)
- Information on your personal and business assets and liabilities
- Evidence of your tax debt, such as through statements from the ATO
- Business Activity Statements (BAS) and business bank statements may be requested, but not always
