Your ATO payment plan has defaulted

When an ATO payment arrangement defaults, the concession ends and the full outstanding balance becomes payable immediately, with general interest charge continuing to compound daily. HomeSec funds the balance against property equity, from $20,000 to $5,000,000, paid directly to the Australian Taxation Office. A defaulted arrangement is one of the most common reasons people call us and it is not a reason to decline.

What actually happens when a plan defaults

A payment arrangement is a concession, not a contract in your favour. Miss an instalment — or fall behind on a new lodgement or a new liability that falls due while the plan runs — and the arrangement can be terminated. When it is:

• The entire remaining balance becomes payable, not just the instalment you missed.
• General interest charge continues to accrue on the whole balance, calculated daily and compounded daily.
• The file moves along the collection path — which is where director penalty notices and garnishee notices sit.
• You stop being someone who is effectively engaging with the ATO. That phrase is the gateway to credit reporting: a business tax debt can be disclosed to credit bureaus where the business has an ABN, owes $100,000 or more overdue by more than 90 days, and is not engaging. A current payment plan keeps you on the right side of it. A defaulted one does not.
• A second arrangement, if offered at all, is generally offered on harder terms than the first.

The interest arithmetic changed in 2025

Two things moved. The general interest charge rate for the quarter beginning 1 July 2026 is 11.43% per annum, up from 10.96% for the April quarter; it is reset each quarter and compounds daily. And from 1 July 2025, general interest charge and shortfall interest charge are no longer deductible.

For years, carrying a tax debt was partly subsidised by the deduction on that interest. That subsidy is gone. The comparison that matters now is the after-tax cost of the ATO balance against the after-tax cost of the facility that replaces it — and for a profitable business, interest on borrowing used for business purposes generally remains deductible while the GIC no longer is.

What it does affect is everyone else

The default does not change anything here. It changes a great deal at a lender that assesses serviceability, because those lenders ask for an ATO integrated client account statement or read the direct debits in your bank statements — and an arrangement, current or broken, is visible in both. A current one reads as committed cash flow against an unpaid liability. A broken one reads as an unpaid liability with nothing holding it back.

That is worth knowing before you spend three weeks applying somewhere that was never going to say yes. It is also the practical argument for clearing the balance rather than rescheduling it: once it is paid there is nothing left to default on, and nothing on the account for the next lender to find.

Why the default does not affect our assessment

A defaulted arrangement tells the ATO something about you. It tells us almost nothing, because we are not assessing the same thing. A bank reads a defaulted tax arrangement as an adverse credit event and generally stops there. We lend against equity in real property and a credible exit, so the questions are: is there a business purpose, is there enough equity, and is there a plausible way out.

We do not require tax returns to be lodged, BAS to be current, or a clean credit file. If those were available you would probably not be reading this page.

Clear it, or bring the plan back into line?

Both are fundable and they are not the same decision.

• Clearing the balance in full stops the interest, removes the debt from the ATO's business tax debt disclosure pathway, and closes out any director penalty exposure attached to it. It is the clean outcome.
• Paying arrears to reinstate an arrangement costs less today. But it leaves the balance, the disclosure exposure and the personal exposure in place, and it leaves you dependent on the ATO agreeing to a second plan.

Where the equity supports clearing it entirely, that is almost always the better outcome. Where it does not, we will say so on the first call rather than writing a loan that only postpones the problem.

How the payment works

Funds are remitted directly to your ATO account using your payment reference number rather than passing through the business account first. The balance clears and the interest stops on the day of settlement, and there is no window in which the money is available to be spent on something else that is also overdue.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager