Thousands of Australian businesses are carrying ATO tax debt. Financing or refinancing that debt through a lender can be a practical solution. Here is how it works.
The ATO collected a record amount in tax debt enforcement activity in 2024 and 2025, following a period of relative leniency during the COVID-19 pandemic. Businesses that accumulated tax debts during that period, and were given extended payment arrangements, have increasingly found themselves under pressure to resolve those debts as the ATO returned to active enforcement mode.For many business owners, a large ATO tax debt sitting on the books is more than a financial burden. It affects the business’s credit profile, can trigger director penalty notices, and in some cases puts the owner’s personal assets at risk. What many do not realise is that ATO tax debt can in some circumstances be financed or refinanced through a lender, releasing immediate pressure and providing a structured repayment path.
Why ATO tax debt has become a bigger issue in 2025 and 2026
During the COVID-19 pandemic, the ATO adopted a highly accommodating approach to tax debt, offering payment plans, deferrals and a general stance of leniency toward businesses in financial difficulty. This was appropriate given the circumstances, but it had a consequence. A significant volume of tax debt accumulated across the small business sector that would otherwise have been resolved more promptly.
From 2023 onwards, the ATO began unwinding this leniency. Enforcement activity increased, payment plan terms tightened, and the ATO began issuing more Director Penalty Notices, which can make company directors personally liable for certain unpaid tax obligations including PAYG withholding and superannuation guarantee amounts.
By 2025 and 2026, the ATO’s outstanding collectable debt had reached record levels, and the organisation was actively pursuing resolution. For business owners with unresolved tax debt, the window to manage this on their own terms, rather than the ATO’s, has narrowed considerably.
What is tax debt financing?
Tax debt financing refers to using a commercial loan or other finance facility to pay out an ATO debt in full, replacing the tax obligation with a commercial lending arrangement. Instead of owing money to the ATO under a payment plan with interest charges (currently 11.36% per annum for general interest charge), the business owner has a loan with a lender at a negotiated rate with defined terms.
This approach is not right for every situation, but it can offer several advantages. Commercial lending rates may be lower than the ATO’s general interest charge. The loan has defined terms and a clear repayment schedule, which is easier to plan around than an open-ended ATO arrangement. Resolving the ATO debt in full removes the enforcement risk, including the risk of director penalty notices or garnishee orders. And clearing a tax debt can improve the business’s credit profile with other lenders.
Tax debt financing is typically done through specialist commercial lenders, non-bank lenders with appetite for business lending, or in some cases through equity release from a property the business owner owns personally or through their SMSF.
How can property equity be used to resolve a tax debt?
For business owners who have equity in a residential or commercial property, refinancing or drawing equity from that property is often the most practical path to resolving an ATO tax debt. The process involves assessing the available equity in the property, refinancing the existing loan to release that equity, and using the proceeds to pay the ATO debt in full.
The advantage of this approach is that residential property equity typically attracts lower interest rates than commercial lending or the ATO’s general interest charge. The loan is secured against the property, which gives the lender confidence and allows for competitive terms.
The challenge is that lenders do not advertise tax debt payoff as a loan purpose, and some lenders are cautious about applications where the stated purpose is to resolve a tax obligation. A specialist broker who understands how to present this type of application can make a significant difference to whether the application is approved and on what terms.
Where the business owner has property in their SMSF, the rules are more restrictive. An SMSF cannot lend money to a related party or use fund assets to resolve personal or business obligations. The property equity approach works only where the property is held personally or in a discretionary trust.
What lenders will consider tax debt financing?
Standard major bank lenders are generally uncomfortable with loan applications where the stated purpose is tax debt resolution. Their credit policies tend to view tax debt as a negative signal about the business’s financial management, and their approval processes are not well suited to the urgency that often accompanies a tax debt situation.
Non-bank lenders and specialist commercial lenders are more willing to consider these applications, provided the overall credit profile of the borrower supports the lending. They assess the total picture, including the value of any security property, the business’s cashflow capacity to service the debt, and the reasons why the tax debt arose.
Caveat lenders and short-term bridging lenders can also provide rapid access to funds for tax debt resolution, though at higher rates that are appropriate only as a short-term measure while a longer-term refinance is arranged.
A broker with commercial lending experience is essential in this space. Presenting the application correctly, to the right lender, with the right supporting documentation, is the difference between an approval and a decline.
What are the risks of tax debt financing?
Tax debt financing is not without risk and it is important to understand the full picture before proceeding.
The most significant risk is that resolving the tax debt through a loan does not address the underlying cause of the debt. If the business’s cashflow problems or tax management issues are not resolved, a new debt can accumulate alongside the loan repayments, compounding the problem.
Secured lending carries the risk that the security property, often the business owner’s home or an investment property, is at risk if the loan is not repaid. The ATO’s claim over personal assets is generally limited by the Director Penalty Notice regime, whereas a secured commercial loan puts property directly at risk.
Short-term or caveat lending at high interest rates can be a lifeline in an emergency but can also create a cycle of refinancing if not managed carefully. Any short-term facility should have a clear exit strategy, typically a refinance to longer-term lending within a defined timeframe.
Independent financial and tax advice before proceeding is important. Resolving the debt is the right goal, but the method needs to fit the business’s broader financial position and capacity to repay.
How Rovo Finance can help business owners with tax debt
At Rovo Finance, we work with business owners across Greater Sydney who are carrying ATO tax debt and looking for a practical path to resolution. We are not accountants or tax advisers, and we work alongside your existing accounting team rather than replacing them. Our role is to identify the right lending solution, whether that is an equity release from a residential property, a commercial loan, or a short-term facility while a longer-term solution is arranged.
We assess your full financial position, identify the lenders most likely to support your application given the circumstances, and manage the application process from start to finish. Where a property is involved, we coordinate with the solicitors handling the conveyancing or refinance documentation.
If you are a business owner carrying ATO debt and are not sure what your options are, the first step is a confidential conversation. There is no cost for the initial assessment and no obligation to proceed.
