ATO hardship, and what it means when the taxpayer is a company

Serious hardship is a test about a person, not a business: the ATO describes it as being left unable to provide food, accommodation, clothing, medical treatment, education or other basic necessities. A company cannot be in hardship in that sense, so what hardship buys a business is time and interest relief, never less tax.

The word means two different things, and only one of them is yours

Somebody searching for ATO hardship is usually hoping for one thing: that the debt can be reduced because the business cannot pay it. It is worth knowing early that the ATO uses the word in two quite separate ways, and the one that reduces a debt is not available to a company.

The first is the statutory test. The ATO describes financial hardship as being unable to provide for yourself, your family or your dependants — and names what it means by that: food, accommodation, clothing, medical treatment, education or other basic necessities. Read it again and notice what kind of thing is being measured. Groceries. Rent. A child's schooling. It is a test about a household's living costs, which is why it attaches to a person and has no company equivalent at all. Nothing about a company's trading position can satisfy it, and the ATO is explicit that companies, trusts and partnerships cannot apply for a release — what the ATO's help actually consists of sets out that distinction and the words around it in full.

The second is administrative, and it is the one that matters to a business. It is a set of decisions the ATO can make about timing and about interest: extra time to lodge or to pay, a payment plan, remission of some or all of the general interest charge, remission or cancellation of a penalty, priority processing of a return that will produce a refund, and Dispute Assist where there is a dispute to run. All of it is real, and none of it touches the primary tax. A business that understands which half it is asking for stops wasting weeks asking for the other one.

You are not the first one this week

Most owners in this position ring their bank at some point in the same week, and most of them are told no. The reasons are almost never about whether the loan would be repaid: the last financials look wrong, a lodgement is late, the credit file has a mark on it, or a tax balance shows up in the statements and the application stops being read. Those are the things a bank exists to care about. None of them says anything about whether there is equity in the building.

That gap is where HomeSec has been since 2004. We are not here to judge how the balance got there, and we have seen it often enough that it does not surprise us. What we look at is whether there is enough unused equity in real property and whether the purpose is a genuine business one — not financials, not a credit score, not whether everything is up to date, and no interrogation about the last two years. From a clean, complete scenario funds can be available in as little as 24 hours, and interest can be capitalised for up to six months so there is nothing payable while the business gets its feet back under it.

Back to the ATO, because the deferral is free and worth asking for whatever else happens.

How to ask, and why the timing of the call decides the answer

Hardship support is not claimed on a form. It is a conversation, and four things about that conversation change what comes out of it.

1. 1
   Ring before the due date, not after it.The ATO's own instruction could not be plainer: if you are finding it hard to lodge and pay in full and on time, you should contact it before the due date. Before, the question on the table is a deferral. After, the amount is overdue, the general interest charge has started, and the question has quietly become a debt. Same business, same money, worse conversation.
2. 2
   Lodge anyway, even if nothing can be paid.Lodging and paying are separate obligations, and the ATO's reason for insisting on the first is a practical one — lodging on time keeps your information up to date, which is what gives you certainty about the amount you need to pay. Being behind on lodgements also narrows every option above. What to do when the BAS is due and the money is not there covers that split.
3. 3
   Bring the specific difficulty, with dates.The ATO asks you to share the specific difficulties you are experiencing, and says that relevant detail about your circumstances is what helps its staff decide whether to refer you for specialised support. So: the client who went into administration owing you money, the month the site was shut, the contract that settles in March. Its own published example of what that produces is a five-week deferral of lodgment and payment for a grazier — modest, but it was free and it was asked for.
4. 4
   Ask for the shortest plan the business can actually keep, not the longest it can get.General interest charge applies to any amount not paid by the due date — 11.51% a year for the quarter beginning 1 October 2026 — and the ATO's own advice is that a plan finalising the debt in the shortest period reduces the GIC you pay. A long plan feels like relief and costs more. A plan the business then defaults on costs more again; a defaulted plan is harder to replace than the first one was to get.

The ATO business enquiries line is 13 28 66, and the self-help service on 13 72 26 arranges smaller plans without speaking to anyone. Your tax agent can see the accounts and ask things you cannot, which is usually an hour well spent. For the self-service limits and what disqualifies a business from using them, see how to set up an ATO payment plan.

The one concrete thing engaging buys

There is a line on the ATO's enforcement page that deserves more attention than it gets. The actions it lists are the serious ones — a garnishee notice to a bank or a debtor, a director penalty notice making a company debt personal, disclosure of a business tax debt to registered credit reporting bureaus, a direction to pay the super guarantee charge, departure prohibition orders, freezing orders, a demand for security, and legal action after those. Firmer action becomes more likely, it says, where reminders by text and letter are ignored.

And then: if you have already engaged with the ATO to manage your tax debts, the debts will not be reported to credit reporting bureaus. That is the single most valuable sentence in the whole subject for a trading business, because disclosure is the action with the widest blast radius. Once a tax debt is on the credit file it is not the ATO you are dealing with any more — it is every lender, insurer, landlord and supplier who runs a check, and they will each draw their own conclusion. Nothing else in hardship support is as cheap to obtain or as expensive to lose.

Which is also the honest warning. Engagement is not a one-off phone call that buys permanent protection. It is kept by lodging, by keeping to whatever was agreed, and by ringing again before the next date rather than after it. If a plan has already been refused or cancelled, that is a different problem with its own route, and it is worth taking seriously rather than waiting to see what happens.

Three hardship regimes, and people mix them up constantly

Almost every week somebody arrives at this subject having conflated three unrelated things, and the confusion costs real time. They are separate, run by different bodies, and only the first is about tax at all.

1. 1
   ATO hardship, which for a company is about timing and interest.Everything on this page. A deferral, a plan, remission of interest and penalties. The debt itself survives all of it, and a company cannot be released from it.
2. 2
   Early access to superannuation, which is not a business facility.The ATO approves compassionate release only on the grounds set in the regulations: medical treatment, medical transport, modifying a home or vehicle for a severe disability, palliative care, death, funeral or burial expenses for a dependant, and preventing foreclosure or forced sale of your home. A business debt is not on the list, and the home ground is about the mortgage over your home — the ATO adds that interest, administrative fees or penalties charged on the borrowed amount cannot be considered. Severe financial hardship is a separate ground and is not administered by the ATO at all; that application goes to your super fund. Anything released is taxed as a normal super lump sum. And if somebody offers to unlock your super through a self-managed fund, the ATO's own word for that is illegal, with heavy penalties for taking part.
3. 3
   Lender hardship, which is a consumer right.The hardship notice process people have heard of belongs to regulated consumer credit under the NCCP Act — a home loan, a car loan, a credit card. A loan taken wholly for business purposes sits outside that Act, so those protections do not apply to it, and that is true of HomeSec's lending as much as anyone else's. A business borrower asks its lender, and the answer is a commercial one rather than a statutory one. Worth knowing before building a plan on a right you do not have.

Where borrowing helps here, and where it plainly does not

Hardship support solves a timing problem and nothing else, so borrowing is the answer in the same narrow set of cases. It makes sense when the debt is the residue of something that has passed — a slow season, a client who paid late, a project that ran long — and the business behind it works. It makes sense where the deferral asked for was refused, or granted and then run out, and the date is now immovable. And it makes sense where the debt is blocking something larger: a refinance waiting on a clean tax position, a sale, a tender that will not be awarded to a company with a disclosed debt. That is what a business loan to pay the ATO is for, and the money goes straight to the ATO rather than to the business.

It is the wrong answer in four situations, and we would rather say so here than on the phone. If the free thing has not been asked for yet, ask for it first — a deferral and a remission of interest cost nothing and may shrink what needs financing at all, and the interest and penalty share of an aged balance is often larger than people expect. If the business loses money every month and the tax debt is simply the visible part of that, more debt secured on the family's property keeps a loss running and risks the house as well as the company — the call to make is to a registered liquidator about small business restructuring, not to a lender. If there is no equity in real property, this is not our answer at all: the Small Business Debt Helpline on 1800 413 828 is free, independent and confidential, and nothing about shopping around changes the arithmetic. And if what is wanted is for the debt to be smaller rather than later, no lender can produce that and neither can the ATO for a company; borrowing moves the debt to a different creditor, which is sometimes exactly right and should never be mistaken for relief.

This page explains what the ATO's own published guidance says about hardship and what each option does. It is general information, not legal, tax or insolvency advice: what to do in your circumstances is a question for a registered tax agent, a registered liquidator or an insolvency lawyer, and the ATO's own guidance on financial hardship, help with paying and firmer action is the primary source.

Reviewed by Paul Stone, Joint Chief Executive