Guide · ATO debt

How to set up an ATO payment plan

Where a business owes $200,000 or less, a payment plan can be arranged through ATO online services without speaking to anyone; the business self-help line on 13 72 26 handles debts under $100,000. Lodgements need to be up to date, and general interest charge continues to accrue on the balance throughout.

Setting one up

1
Lodge everything that is outstanding first.Returns, activity statements, super statements. The ATO expects lodgements to be current before it grants a plan and expects them to stay current while it runs. Lodging also converts an estimated debt into a real one, which is the only basis on which a sensible plan can be built.
2
Work out what the business can actually pay each month.Not the most it could pay in a good month — the amount it can pay in a poor one. The ATO's payment plan estimator will model it. This is the number the whole arrangement stands or falls on.
3
Set it up in Online services for business, or by phone.Online for balances of $200,000 or less. The business self-help phone service on 13 72 26 handles debts under $100,000. Above those, or after two or more defaults in twelve months, phone the ATO's business line on 13 28 66, 8am to 6pm Monday to Friday.
4
Expect an upfront payment.The ATO typically asks for an amount now and instalments after it. Being able to make a meaningful first payment materially improves what you are offered.
5
Keep lodging on time.A missed lodgement cancels plans as reliably as a missed payment. Diarise every activity statement for the life of the arrangement.

What a payment plan does not do

It is permission to pay late. It is not a discount, a freeze, or protection from what the ATO can otherwise do. Three things in particular continue.

Interest keeps accruing. General interest charge compounds daily on the outstanding balance, currently 11.43% for the quarter beginning 1 July 2026. The debt grows while you pay it.
The interest is no longer deductible. Since 1 July 2025, general interest charge and shortfall interest charge cannot be claimed as a deduction. Every dollar of it is paid out of after-tax income, which is a real increase in the cost of carrying a tax debt and the single most important change to this arithmetic in years.
Director liability is unaffected. A plan does not remit a director penalty for unpaid PAYG withholding, superannuation guarantee or GST, and it does not stop the clock on a Director Penalty Notice that has already been issued.

Why most plans fail

A payment plan adds a new fixed monthly commitment to a business that was already unable to pay a bill when it fell due. Nothing about the arrangement makes the business earn more or spend less; it simply schedules the shortfall. If the instalment is set at what the business can manage in a good month, the first ordinary month breaks it — and a cancelled plan is worse than no plan, because the full balance falls due at once and the ATO's recovery options all come back at the same time.

Our page on a payment plan that has already defaulted covers what happens next and what can still be done.

The comparison worth doing before you commit

There are two ways to deal with a tax debt: schedule it, or clear it. Both are legitimate, and the right answer depends on the arithmetic rather than on which feels safer.

	Payment plan	Clearing the debt
Cash needed now	An upfront amount, then monthly instalments	None — the debt is paid from settlement
Interest	General interest charge, compounding daily, not deductible	Interest on the loan, which for a business purpose is generally deductible
Ongoing pressure	A fixed instalment every month on top of everything else	No repayments for the first six months
If things go wrong	The plan cancels and the full balance falls due	An open term with no fixed end date
Director penalty exposure	Remains	Removed, once the liability is paid
Requires	Lodgements up to date and capacity to pay	Equity in real property

Where the business can comfortably carry the instalments, a plan is cheaper and simpler and you should take it. Where meeting them would mean paying the ATO instead of a supplier or a wage, that is the situation a plan is least suited to, and it is worth reading how clearing the debt works before committing to a schedule the business cannot hold.

If the number was not the whole problem

A payment plan is the right answer when the business can meet the instalments on top of everything else it already pays. The reason most plans default is that it could not, and nothing about the arrangement changed that.

If you are reading this because money is tight, it may be that what you actually need is fast business finance — and HomeSec can lend with very few qualification criteria. All you need is sufficient equity in real estate and a business purpose: no financials, no valuation, no credit score threshold, funded in as little as 24 hours from a clean, complete scenario. Best of all, the first six months can come with no requirement to make any payment.

That's the HomeSec Advantage.

Questions people ask alongside this one

Can I set up an ATO payment plan myself?

Usually, yes. Where the balance is $200,000 or less, the ATO lets you arrange a plan through its online services without speaking to anyone. The business self-help phone service on 13 72 26 handles arrangements for debts under $100,000. Above those figures, or if you have defaulted on two or more plans in the last twelve months, you have to talk to the ATO directly.

Does interest keep running on a payment plan?

Yes, and this is the part most people miss. The general interest charge continues to accrue on the outstanding balance, compounding daily, at 11.43% for the quarter beginning 1 July 2026. A payment plan is permission to pay late, not a freeze on the cost of paying late.

Is the interest on an ATO payment plan tax deductible?

No, not since 1 July 2025. General interest charge and shortfall interest charge stopped being deductible on that date, which materially changed the arithmetic of carrying a tax debt: the whole cost now comes out of after-tax money. For a business paying company tax, that is a substantially higher effective cost than it was before the change.

Do I have to lodge everything before I can get a plan?

In practice, yes. The ATO expects outstanding returns and activity statements to be lodged, and it expects you to keep lodging on time while the plan runs. An unlodged return is one of the most common reasons a plan is refused or cancelled, and lodging is the single most useful thing you can do before you call.

What happens if I miss a payment?

The plan can be cancelled. When that happens the full balance becomes payable immediately, the ATO is no longer bound by the arrangement, and its recovery options — garnishee notices, director penalty notices, disclosure to credit reporting bureaus — become available again. It also makes a second plan harder to obtain, because the ATO takes past defaults into account.

Will a payment plan stop a director penalty notice?

Not by itself, and this is a dangerous misunderstanding. A payment plan does not remit a director penalty for unpaid PAYG withholding, super or GST. Entering into a plan may influence what the ATO chooses to do, but it does not switch off the personal liability, and it does not stop the 21-day clock on a notice that has already been issued.

Can I negotiate the instalments?

Within limits. The ATO's online tool proposes an upfront amount and an instalment schedule, and where you deal with someone directly there is room to discuss the period and the amount. What there is no room on is the interest, which is set by legislation.

Is a payment plan better than borrowing to clear the debt?

It depends on three numbers: the general interest charge, the cost of the loan, and whether the business can actually meet the instalments. A plan preserves your cash and costs non-deductible interest. A loan clears the debt, stops the interest and the enforcement exposure, and costs deductible interest on a facility that may require no payments for six months. Where the plan's instalments would strain the business — which is why most plans default — the loan is usually the safer of the two.

Can I have a payment plan and still get a business loan?

Yes. HomeSec assesses the property and the exit, not your ATO position, and an existing arrangement does not disqualify anyone. Many of the files we write involve a balance that has been under a plan, or a plan that has already defaulted.

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Reviewed by Paul Stone, Joint Chief Executive