You have just been hit with a large ATO tax bill - maybe it is a BAS liability that crept up, a CGT obligation after selling an asset, an unexpected income tax assessment, or Payday Super contributions stacking up. The amount is $50,000, $100,000, maybe more. You know you owe it. The question is how to pay it without crippling your business cash flow.
This is one of the most common situations we deal with at OverdraftMe. Here are the options available to Australian business owners, what each one costs, and when each makes sense.
Before we look at solutions, it is worth understanding what is at stake. The ATO does not sit still on overdue debts.
The cost of doing nothing is almost always higher than the cost of any of the options below. Acting early gives you the most choices and the best outcomes.
You contact the ATO (13 11 42 or online via myGov/myTax) and negotiate a payment plan to pay the debt in instalments over an agreed period. The ATO is generally willing to negotiate, particularly for debts under $200,000.
The GIC continues to accrue on the outstanding balance at approximately 11.36% p.a. This interest is not tax deductible.
You take out a business overdraft or line of credit and use it to pay the ATO in full. The ATO debt is cleared immediately. You then repay the overdraft from operating cash flow.
Business overdraft rates typically range from 8% to 18% p.a. depending on your risk profile, the lender and the amount. Critically, the interest on a business overdraft used for business purposes is tax deductible.
| Factor | ATO Payment Plan | Business Overdraft |
|---|---|---|
| Interest rate | ~11.36% p.a. (GIC) | 8-18% p.a. (varies) |
| Tax deductible interest | No | Yes |
| Effective cost (at 25% tax rate) | 11.36% | 6-13.5% after deduction |
| ATO debt cleared | No - remains until paid off | Yes - cleared immediately |
| Credit file impact | ATO debt visible | Standard commercial facility |
| Speed to arrange | Same day (online) | 24-48 hours (via broker) |
| Flexibility | Fixed instalments | Draw and repay as needed |
Real example: A plumbing contractor owed the ATO $87,000 in accumulated GST and PAYG. The GIC was costing $9,900 per year (not deductible). We arranged a $100,000 business overdraft at 12.5% - the interest was $10,875 but tax deductible, making the effective cost $8,156. The ATO debt was cleared in full, the credit file cleaned up, and the remaining $13,000 in the facility gave him a working capital buffer.
We arrange business overdrafts specifically to clear ATO debts every week. 50+ lenders on panel. No upfront fees. Honest assessment within 24 hours.
Get a free assessment →A fixed-term business loan (typically 6-24 months) is used to pay out the ATO debt. You repay the loan in regular instalments - daily, weekly or monthly depending on the lender.
Rates vary from 8% to 25% depending on the lender, your risk profile and the term. Some lenders charge a flat fee rather than an interest rate. Interest is tax deductible.
If you already have multiple debts - an ATO liability, an existing business loan, outstanding credit card balances - a debt consolidation loan can roll them into a single facility with one repayment.
If your business has the cash available, you pay the ATO directly. Simple. But consider setting up a business overdraft as a safety net before you drain your reserves - so you have a backup if cash flow dips in the weeks after.
Common mistake: Business owners pay a large ATO bill from reserves, then find themselves short when BAS, super, payroll or a supplier payment comes due the following month. Having an overdraft in place as a buffer costs nothing until you use it.
| Your Situation | Best Option |
|---|---|
| ATO debt under $20,000, cash flow is manageable | ATO payment plan |
| ATO debt $50,000+, want it cleared and off your record | Business overdraft |
| One-off tax bill, prefer fixed repayments | Short-term business loan |
| Multiple debts creating cash flow pressure | Debt consolidation |
| Have the cash but worried about the gap it leaves | Pay + set up overdraft safety net |
| CGT liability after selling a business or asset | Read our CGT guide + business overdraft |
OverdraftMe has 50+ lenders on panel and deals with ATO debt situations every week. We will tell you honestly which option makes the most sense for your situation - and if a business overdraft is the right move, we can typically get approval in 24-48 hours.
Get a quote →Yes. Many non-bank lenders will approve a business overdraft or short-term loan specifically to clear an ATO debt. In fact, paying out an ATO debt in full can improve your credit position and simplify your obligations. A specialist broker can match you to lenders who regularly approve this type of funding.
The ATO charges a General Interest Charge (GIC) of approximately 11.36% per annum on overdue amounts. If the debt remains unmanaged, the ATO can issue a Director Penalty Notice, report the debt to credit agencies, garnishee your bank accounts, or initiate wind-up proceedings. Acting early is critical.
Often yes. The ATO's General Interest Charge is approximately 11.36% p.a. and is not tax deductible. A business overdraft typically ranges from 8-18% p.a. depending on your risk profile, and the interest is tax deductible as a business expense. For debts over $50,000, the savings can be significant.
Through a specialist broker like OverdraftMe, approvals can happen in 24-48 hours with some non-bank lenders. You will typically need 6+ months of bank statements and basic business details. Funds can often be available the same week.
It can actually improve it. An overdue ATO debt reported to credit agencies is a negative mark on your file. Clearing it in full with a business overdraft removes that negative signal. The overdraft itself is a standard commercial facility that does not carry the same stigma as an unpaid tax debt.
Yes. Business overdrafts are revolving facilities - you draw down when cash is tight (such as BAS quarter or super payment dates) and repay when revenue comes in. Many OverdraftMe clients use their facility specifically for this purpose.
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