Insights
ATO payment plan: what it costs now, and what else is available
From 1 July 2025, the interest on an ATO payment plan stopped being tax deductible. That one change is quietly pushing a lot of business owners to look at refinancing tax debt instead.
An ATO payment plan lets you pay off tax debt in instalments instead of one lump sum, but it still accrues the general interest charge (GIC), currently 11.17% per annum, and since 1 July 2025 that interest is no longer tax deductible. That one change has a lot of owners asking whether refinancing the debt onto a business loan, where the interest usually is still deductible, costs less.
What’s changed with ATO payment plans?
Under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, any general interest charge (GIC) or shortfall interest charge (SIC) incurred on or after 1 July 2025 is no longer tax deductible, regardless of which income year the debt relates to. GIC currently sits at 11.17% per annum, and it applies to the balance owing on a payment plan the same way it applies to any other unpaid ATO debt.
Before this change, that interest could usually be claimed as a deduction, softening the real cost. Now it can’t. An ATO payment plan hasn’t become more expensive on paper. It has after tax, and that’s the number that matters.
Is interest on a business loan tax deductible?
Generally, yes. Interest on borrowing used for a business purpose is typically deductible, which is the opposite of where ATO interest charges now sit. This is general information, not tax advice, so confirm your specific position with your accountant or registered tax agent before making a decision either way.
That contrast (one interest cost deductible, the other not) is the whole reason refinancing ATO debt has become a live question this year.
Can you refinance ATO debt onto a business loan?
Yes. A number of non-bank lenders on our panel will refinance ATO debt onto a term-loan-style facility, and in Andrew’s experience the rate they offer often lands close to what the ATO itself charges on a payment plan. On the surface that can look like a wash, but it isn’t, because the loan interest is generally deductible where the ATO’s isn’t anymore.
The other practical difference is structure. A payment plan is a relationship with the ATO with its own compliance conditions attached, missing a payment or falling behind on a new lodgment can put the whole arrangement at risk. A term loan is a fixed, contracted repayment schedule that doesn’t carry that same compliance link. We’d rather do this with your accountant than around them. They know the tax position, and a refinance shouldn’t come as a surprise at the end of the financial year.
We’re filming a segment with one of our funding partners on how they price and structure an ATO debt refinance, and what they look for before approving one. Once it’s up, it’ll sit here.
Could refinancing ATO debt help you get approved by a major bank?
In some cases, yes. Most major banks won’t lend to a business with an active ATO debt on file at all, so clearing it, even by refinancing it elsewhere first, can be the thing that makes a business bankable again. Andrew has worked on applications where this played out: a client refinanced the ATO debt through a non-bank lender, kept a clean record for a period after, and became a realistic candidate for major bank pricing on their next facility.
It won’t happen overnight, and it isn’t guaranteed for every business. A bank still assesses the whole picture, not just whether the ATO debt is gone. But a clean ATO account is one of the more concrete things you can fix before that conversation.
| What matters | ATO payment plan | Refinanced onto a business loan |
|---|---|---|
| Interest cost | GIC, currently 11.17% p.a. | Set by the lender, often in a similar range |
| Tax deductibility | Not deductible from 1 July 2025 | Generally deductible for a business purpose, confirm with your accountant |
| Structure | Ongoing arrangement with the ATO, tied to staying current on lodgments | Fixed, contracted repayment schedule |
| Effect on bank eligibility | Active ATO debt usually rules out major bank lending | Clearing the debt can rebuild eligibility over time |
Can you still get funding if you’re already on an ATO payment plan?
Usually, yes, just not from a major bank. Working capital facilities and asset finance are commonly still available from non-bank lenders while a payment plan is active, since they’re assessing the whole business and its trading pattern, not applying a blanket policy against any ATO debt on file.
What’s achievable depends on how the payment plan is tracking, how long it’s got left, and what the rest of the business’s financials look like. That’s worth a real conversation rather than assuming either way.
When staying on the ATO payment plan is still the right call
If you can comfortably service the payment plan, it’s close to being paid out, and you’d rather not take on a new facility for a debt that’s nearly gone, refinancing may not be worth the effort. Be cautious, too, about refinancing tax debt onto a facility that’s more expensive once fees are counted. The deductibility change matters, but it doesn’t automatically make every refinance option cheaper overall.
If that’s you, say so on the call. We’d rather tell you to stay put than refinance a debt that’s nearly gone.
Who is eligible to set up an ATO payment plan?
It depends on the type and size of the debt. Businesses owing $200,000 or less can often set one up online, while larger or more complex debts generally mean dealing with the ATO directly. The ATO’s own payment plan guidance covers the current thresholds and process in full.
Carrying ATO debt and not sure what your options are?
Tell us where the payment plan stands and we’ll tell you whether refinancing makes sense for your business, or whether it’s better left as is.
Frequently asked questions
Give us the basics below and we’ll call you within the hour, or at the time you choose, then come back with the two or three offers worth your time.