Outstanding tax debts owed to the Australian Taxation Office (ATO) are among the most common debts carried by small businesses in Australia. Indeed, small businesses accounted for 66.1% of the $54.2 billion in total collectable debt owed to the ATO in 2024–25.
With these debts growing, and against the backdrop of recent changes to the deductibility of their interest, SMEs and larger businesses are increasingly turning to tax debt loans to help them clear their ATO balances. These loans allow owners to space out the payment of the debt over a more manageable period, but they may not be available to all businesses.
What are business tax debt loans?
Tax debt loans are often short-term business loans taken out to cover the balance of any outstanding or overdue debts to the 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.
It’s important to understand that most lenders don’t offer a single “tax debt loan” product for businesses. Several different types of loan and finance products can help you cover your tax debts, so the one you choose will depend on what’s available to your business or is best suited to your needs.
What tax debt loan options are available to my business?
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 can start from as little as $5,000 and can reach up to $250,000 to $300,000 at the higher end, with terms tending to max out at three to five years. 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 or doesn’t have a borrowing history to fall back on, 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) and loan terms of up to 30 years in some cases.
If you’re the owner of a smaller business with a tax debt, putting up an asset as loan security can boost your chances of approval for the loan you want significantly. You’ll have to weigh up the risk of losing your asset should you become unable to repay your loan debt, though. It’s also 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. If the debt is only relatively small and you already have one of these open, it may be a convenient way to clear it.
However, because interest rates and fees charged on these products are generally much higher compared to standard business loans, you should only use one if you’re confident that you’ll be paying off within a short period. Additionally, some lines of credit and overdrafts come with lower caps of $50,000 to $100,000, making them unsuitable 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 can be paid up to 85% and 95% of your outstanding invoices’ value, with the remainder to come once the invoices are paid (minus fees from your financier).
The amount you’ll receive will depend on the type of invoice finance you choose, with invoice factoring and invoice discounting both available.
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 lenient. 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, though, lenders can approve your application.
- Tax return not submitted: if the reason you have a tax debt is that 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 aren’t dependable enough.
Business tax debts: 2026
Changes to tax deductibility on ATO debt
From 1 July 2025, general interest charges (GIC) and shortfall interest charges (SIC) on ATO debts are no longer tax-deductible. This means businesses must now find after-tax dollars to cover this interest, rather than the pre-tax dollars they could use previously.
The GIC rate itself has also climbed. For the July to September 2026 quarter, it sits at 11.43% p.a., up from 10.96% in the previous quarter and 10.65% at the start of the year. Since it compounds daily, the effective annual cost is even higher than the headline rate.
How much tax debt do small businesses owe?
Small businesses account for the large majority of the ATO's collectable tax debt. Collectable small business tax debt was $35.9 billion of the ATO's $54.2 billion total collectable debt in 2024–25, 66.1% of the total, and more than four times the small business share of the overall economy (small business's collectable debt ratio sits at 34.2%, compared with an overall collectable debt ratio of 8.1%).
This debt has grown sharply: small business collectable tax debt rose by $19.4 billion, or 118%, between 2018–19 and 2024–25. There are now 1,338,387 small businesses carrying collectable tax debt, with an average balance of $26,797.
Business tax debt defaults
According to CreditorWatch's June 2026 Business Risk Index, businesses with ATO tax debts exceeding $100,000, the threshold at which debts are disclosed to credit reporting agencies, recorded an average insolvency rate of 21.9% over the 12 months to June 2026, 31 times the national average of 0.7%.
As of 30 June 2026, there were 35,361 businesses carrying tax debts above this threshold, and more than half (53.8%, or 19,024) were sole traders, who typically operate on tighter cash margins and smaller cash buffers than larger businesses.
While business insolvencies fell by 3.9% in FY26 compared with the previous year, this doesn't necessarily reflect reduced risk. ATO tax debts and trade payment defaults both climbed over the same period, pointing to growing financial stress building into FY27.
How to apply for a tax debt loan through Savvy
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Complete our online form
Start by sharing some information about your business and the type of finance you’re after.
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Submit any further documents we need
Send 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
Your broker will give you a call and talk through your business’ finance options.
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Have your application prepared
We’ll put together your formal application and submit it to your lender for assessment.
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Get approval and sign off
Once you’re approved, sign the documents and have the funds transferred to your business’ account.
Why apply for a business loan with Savvy?
Is my business eligible for a tax debt loan?
Each lender has its own eligibility requirements, as does each business finance product. However, the general eligibility criteria you’ll need to satisfy are as follows:
- 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
You’ll also have to provide all the documents your lender needs to assess your application. While these also vary depending on who you apply with, you’ll need the following as a minimum:
- Personal 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
Business tax debt loan alternatives
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. 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.
When you have a tax debt that you might have an issue paying off, it’s often the best first step to let the ATO know as soon as possible. This is especially the case if your business qualifies for an interest-free plan.
