Can I get a personal loan to pay a business tax debt?

Rarely, and the reason is the purpose rather than the amount. A personal loan is regulated consumer credit, meaning credit wholly or predominantly for personal, domestic or household purposes — and clearing a business tax balance is a business purpose. So the honest answer is that what you are describing is a business-purpose loan, and the sensible question is which one.

Two loans that look like one choice, and are not

Somebody searching this has usually already worked out the appeal. A personal loan does not touch the house, it can be applied for in an evening, and it does not involve explaining the business to anybody. What stops it is not the size of the debt. It is what the money is for.

Regulated consumer credit means credit provided wholly or predominantly for personal, domestic or household purposes — or to a person buying, renovating or improving a residential investment property. Credit provided wholly or predominantly for business purposes falls outside those rules, and paying a company's or a sole trader's tax balance is a business purpose by any reading of it. That is why most consumer lenders ask what the funds are for and decline this answer, and why the ones who do not are writing a business loan under a personal label. A business purpose declaration records which side of the line a loan sits on; it does not move the line, and it is ineffective where the lender knew or had reason to believe the stated purpose was not the real one.

None of that is a technicality to be navigated around. It is the thing that decides what protections you have, what the lender can ask for, what the loan can be secured against and — as it turns out below — how the interest is treated at tax time. Getting the category right first saves applying twice.

You are not the first one this week

Most owners in this position ask their bank before they ask anyone else, and most are told no. The reasons almost never have anything to do with whether the loan would be repaid: the last financials look wrong, a lodgement is late, the credit file has a mark on it, or an ATO balance appears in the statements and the application quietly stops being read. Those are the things a bank exists to care about. None of them says a word 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 question, because which loan is right depends first on whose debt this actually is.

Whose debt is it? That answer changes the rest

People use "my tax debt" for two quite different things, and nearly every decision downstream turns on which one it is.

1. 1
   A company's debt.It belongs to the company, not to you, until something moves it. The thing that moves it is a director penalty notice, which makes unpaid PAYG withholding, net GST or the super guarantee charge your personal liability. Until then, a personal loan in your own name is you lending your own money to the company — which may be exactly what you intend, and should be a deliberate decision rather than an accident of which application was easiest to fill in.
2. 2
   A sole trader's debt.There is no second entity. The balance is yours, and so is every consequence of it. That makes the borrowing simpler to arrange and the stakes more personal, and it puts you squarely into the deduction question below, where the ATO draws a line between a taxpayer carrying on a business and an individual who is not.
3. 3
   A trust's or a partnership's debt.Worth being precise about, because the ATO's published position is that an individual partner cannot deduct interest on borrowings used to pay a tax-related liability under the general deduction provisions. Who the borrower is and who the taxpayer is are two separate questions, and your registered tax agent is the person to answer both before an application goes anywhere.

If you are not yet certain where the figure itself comes from, that is worth half an hour before any borrowing — a business tax balance is usually several accounts and several periods netted into one number, and the interest and penalty share of an aged balance is often larger than people expect.

The deductibility change that quietly reshaped this question

This is the part of the subject that has moved, and it is the strongest practical reason not to treat a tax balance as cheap money. For income years starting on or after 1 July 2025, interest charged by the ATO on late payments and underpayments is no longer tax deductible. The general interest charge and the shortfall interest charge both used to be; neither is now. The ATO also notes that a remission is not there to cushion that change — cash flow difficulty caused by losing the deduction will not on its own support one.

Interest on money borrowed to pay the debt is treated differently. The ATO's own wording is that a taxpayer carrying on a business may be able to claim a deduction for interest incurred on borrowings used to pay a tax related liability under the general deduction provisions, but only where that interest is necessarily incurred in carrying on the business for the purpose of gaining or producing assessable income. An individual who is not carrying on a business cannot, and nor can an individual partner in a partnership.

Read those two paragraphs next to each other and the shape of the decision is clear enough. The general interest charge is 11.51% a year for the quarter beginning 1 October 2026 and it is now paid out of after-tax money. Business-purpose borrowing may not be. That is not advice to borrow — it is the reason the ATO itself says, in its own reminder on the change, that you should discuss your position with your accountant or finance provider to understand whether there are alternative methods of funding payment of tax debts that might have a lower interest rate. The same reminder adds the sentence that belongs on every page like this one: if you are considering third party financing to pay your tax debt, discuss the tax implications with your registered tax agent or adviser first.

What a personal loan would actually do here

Set the purpose problem aside for a moment and assume a lender would write it. Four features of an ordinary personal loan matter to somebody in this position, and they are the reason it is the wrong instrument rather than merely the unavailable one.

1. 1
   It is assessed on you, not on the business.ASIC's Moneysmart puts it plainly: lenders may look at your credit score, income, expenses and savings. If the tax balance has already produced a default or a disclosed debt on the file, that is precisely the thing being examined. A business loan assessed on property equity rather than on a credit file works the other way round, which is why the two applications can get opposite answers in the same week.
2. 2
   Repayments start immediately.Moneysmart gives the usual range of terms as one to seven years, amortising from the first month. A business that cannot pay the ATO this quarter is being asked to begin paying somebody else next month instead. Capitalised interest for up to six months exists for exactly this gap, and no personal loan has it.
3. 3
   Unsecured means smaller, not safer.An unsecured loan is one where, in Moneysmart's words, you do not provide security — and the size follows from that. Where a personal loan is secured, it is usually against a car, and Moneysmart's description of the consequence is blunt: if you do not repay, the lender can take and sell your asset. What security does and does not change covers the same trade on the business side.
4. 4
   The purpose question comes back at the worst time.A consumer loan applied to a business debt is a mismatch that tends to surface later — in a tax return, in a refinance, or when a lender asks what the funds were used for. It is a small saving in effort now against an awkward explanation later, and the explanation is usually required at the moment you least want to be having it.

Where a personal loan genuinely is the better road

There is a real version of this, and it would be dishonest to write a page like this without naming it. A sole trader with a modest balance, income that comfortably covers an amortising repayment and a clean credit file is a person for whom an ordinary personal loan may be the cheapest and simplest answer available. No mortgage, no property risk, no settlement. If that is you, take it.

The same is true below our own floor. HomeSec lends from $20,000 to $5,000,000, and registering security over a property to clear a balance smaller than that is the wrong instrument for the job — we would tell you so on the phone, so it may as well be here. For a small balance, start with an ATO payment plan, which for many businesses can be arranged without speaking to anyone, and with what the ATO's own help actually consists of. Ask for a deferral and remission of interest before borrowing anything: both are free, both are under-asked, and either may shrink the amount that needs financing at all.

And when borrowing is not the answer at all

Where the balance is large, the business behind it works, and the debt is blocking something specific — a refinance waiting on a clean tax position, a settlement, a sale, a tender that will not be awarded to a company with a disclosed debt — then clearing it with a business loan to pay the ATO is a sound decision, and the funds go straight to the Tax Office rather than into the business account. Where there is time to refinance at bank pricing instead, that is the cheaper road and we will say so.

But if the business loses money every month and the tax debt is simply the most visible part of that, no loan fixes it. More debt secured on the family's property keeps a loss running and puts the house alongside the company. The call to make then is to a registered liquidator about small business restructuring, not to a lender. And if there is no equity in real property, this is not our answer either: the Small Business Debt Helpline on 1800 413 828 is free, independent and confidential, and no amount of shopping around changes the arithmetic. Lastly, if what is wanted is for the debt to be smaller rather than later, borrowing cannot produce that — it 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 published guidance and ASIC's Moneysmart material say, and what each kind of loan does. It is general information, not legal, tax or insolvency advice: whether borrowing suits your circumstances, and how the interest would be treated, are questions for a registered tax agent, a registered liquidator or an insolvency lawyer, and the ATO's own guidance on deductions for ATO interest and on help with paying is the primary source.

Reviewed by Paul Stone, Joint Chief Executive