Why ATO debt stops so many deals
For a lot of mainstream lenders, an outstanding ATO debt is close to an automatic decline. It shows up on the application, sometimes on the credit file, and it raises questions about cash flow the bank doesn't want to answer. The client is then caught in a loop: they need finance to pay the ATO, and they can't get finance because they owe the ATO.
Meanwhile the pressure from the ATO keeps building. Payment plans get harder to maintain, interest charges accumulate, and in more serious cases the client faces garnishee notices, director penalty notices or the threat of further action. Your client needs a fast answer, and you need a lender who doesn't flinch at the words "tax debt".
How Equity Tap approaches ATO debt
ATO debt is not automatically a problem for us. We lend from $50k to $5m for one to twelve months, secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. Paying a business tax debt is a business purpose. What we need to understand is the security, the amount, and how the loan will be repaid.
We don't need tax returns, BAS, profit and loss, an accountant's letter or bank statements for a property-secured loan. That matters here, because clients with ATO debt are often behind on lodgements too. There's no credit check at initial assessment, and we don't order a valuation before approval.
The business owner version of this is on our ATO tax debt business loans guide, which you're welcome to send to your client.
Typical structures for an ATO debt client
| Client situation | Usual structure | Typical exit |
|---|---|---|
| Owns a home with a first mortgage, needs to clear the ATO | Second mortgage | Refinance once the ATO debt is cleared and returns lodged |
| Garnishee notice, needs funds immediately | Caveat for speed | Refinance or receivables |
| Owns commercial premises with low debt | First or second mortgage | Refinance or business cash flow |
| Selling a property, ATO deadline before settlement | Caveat or second mortgage | Settlement of the property sale |
| Strong trading now, behind on old tax | Second mortgage, interest added to the loan | Business cash flow over the term |
The clean-up and refinance path
For many ATO debt clients, the best outcome is a two-step plan:
- Clear the tax debt now with a short-term Equity Tap loan. The pressure stops and the client can focus on the business.
- Get the file in order. Overdue returns lodged, payment history clean, current trading visible.
- Refinance with a mainstream lender that would have declined while the ATO debt was outstanding. That refinance repays our loan.
You run the refinance, and you keep the client from start to finish. To keep pressure off cash flow during the clean-up, interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments during that period. Interest is not waived, and the full cost is shown before proceeding.
For example
For example, a broker's client runs a plumbing business that fell behind on BAS during a slow patch, then won a run of new work. The client owns an investment unit with modest debt. The bank declined a refinance while the ATO debt was outstanding. A second mortgage over the unit pays the ATO in full, with interest added to the loan for six months. Over those months the client lodges the overdue returns, the broker arranges a refinance with a mainstream lender, and our loan is repaid from it.
What to send us
- The ATO debt amount and any notices or deadlines
- Security property and existing mortgage details
- Loan amount and term
- The exit: refinance plan, sale, receivables or cash flow
- ID for borrowers and guarantors
Once we have the scenario, conditional approval can often be given on the phone and a term sheet issued in about 30 minutes. Eligible loans can settle in as little as 24 hours. See our scenario checklist for the full list.
Why it's worth acting early
ATO debt rarely gets easier to deal with by waiting. The sooner a client has a plan in place, the more options they have, and the more equity is still available to work with. If a client mentions tax debt in passing, it's worth a call to us before the situation escalates.
Preparing your client for the call
Clients with tax debt are often embarrassed or worried about being judged. Let them know we deal with ATO debt regularly and that it's not automatically a problem. We'll explain the loan, the costs and the exit clearly, and make sure they fully understand all three before anything proceeds.
Talk to the decision-maker
There's no credit committee at Equity Tap. Call 1300 123 024 or start at apply. Each loan is priced on the client's individual circumstances, aiming for the sharpest rate available for that situation. If the bank has declined for other reasons too, see when the bank says no.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Will you lend to a client who owes the ATO?
My client is behind on BAS and tax returns. Do you need them?
The client has a garnishee notice. How fast can you move?
How does the client repay the loan?
Can the client avoid repayments while they get back on track?
Will the ATO debt show up in your credit check?
Does the security have to be the client's home?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.