Managing ATO Tax Debt: How to Refinance, Restructure, and Regain Control

Tax debt is becoming a common pain point for many Australian business owners.

As of July 1, ATO interest is no longer tax-deductible, meaning it’s now even more expensive to carry outstanding tax bills. Combine that with increasingly tight payment plans, mounting pressure from the ATO, and the need to stay eligible for other finance — and it’s no surprise we’re helping more and more businesses tackle this issue head-on.

In this post, we’ll walk through two real-world strategies for handling ATO tax debt, including how to refinance using your home, what to do if that’s not an option, and how to approach the process step-by-step.

🏡 Option 1: Refinance Your Tax Debt Using Your Home

Let’s say you owe the ATO $200,000. You’re on a two-year payment plan and your repayments are around $9,300 per month — at an interest rate of 10.78%.

That’s a significant monthly drain for most businesses.

In a recent case, we helped a client refinance this tax debt using the equity in their home. Here's how we structured it:

• Their existing home loan was $600,000

• We created a new $200,000 loan split to cover the ATO debt

• The split was structured over 30 years with an interest rate of 6.5%

• Monthly repayments dropped from $9,300 to $1,264, freeing up over $8,000/month in cash flow

Because the purpose of the new split was clearly for business purposes, this loan was now tax-deductible — and, most importantly, manageable.

This is typically a two-step process:

1. Step 1 – Refinance and clear the ATO debt to reduce cash flow pressure and clean up the financials

2. Step 2 – Once the business has stabilised, refinance the entire package back to a major bank for long-term savings

🏠 When You Can’t or Don’t Want to Use Your Home

Plenty of business owners either don’t have property, don’t have enough equity, or don’t want to take on the full risk — especially when multiple business partners are involved.

And if you’ve ever tried to go to your bank to get an unsecured loan specifically to pay tax debt, you’ve probably hit a brick wall.

Banks generally don’t like lending for this purpose — particularly without security.

💡 Option 2: Refinance Tax Debt with a Non-Bank Business Loan

Thankfully, there are now non-bank lenders who will refinance ATO tax debt, even without property.

Yes, the interest rates are higher, but the monthly repayments can be significantly lower — and that’s the part that makes a real difference for business cash flow.

In one case:

• We refinanced a $200,000 tax debt

• ATO repayments were around $9,300/month on a 2-year plan

• We refinanced to a 4-year loan, reducing repayments to around $6,000/month

• That’s $3,000/month in cash flow saved — which often means the difference between stress and sustainability

Here’s the kicker: once that ATO debt is gone, the business no longer has a red flag against its name. Instead, it’s simply a business with a commercial loan — something far easier to explain and refinance with a major lender down the track.

🔁 Why This is Often a Two-Step Process

Whether you refinance using your home or via a non-bank business loan, our strategy is usually staged:

1. Step 1 – Clear the ATO tax debt, restructure your repayments, and restore cash flow

2. Step 2 – Once your business is back on stable footing and financials are updated, refinance to a lower-rate facility with a major lender

That might mean moving the $200,000 loan into your home loan, refinancing to a more competitive business loan, or accessing additional facilities like an overdraft or equipment finance. The goal is always the same: move away from urgent debt and toward long-term stability.

🚨 Four Reasons You Should Act Early

Here’s why tackling tax debt proactively matters:

1. Interest is no longer tax-deductible, so the cost is higher than ever

2. Repayment plans are short and demanding — often 12 to 24 months

3. Tax debt can block access to other finance — many lenders simply won’t approve funding if you have unpaid ATO debt

4. The ATO is an aggressive creditor — you don’t want to wait until enforcement begins

Final Thoughts: It’s Not Just About the Rate, It’s About Flexibility

If you or a client is juggling a large tax bill, cash flow pressure, or roadblocks to finance — the key is to take action early.

Whether you use property equity or go down a non-bank route, what matters most is freeing up breathing room, restoring financial flexibility, and getting access to the funding you need to move forward.

If you’re not sure where to start, feel free to get in touch — we’re helping business owners across Australia restructure their debt and reset their path.

Esha Frykberg
Finance Broker | Business Lending Specialist
#BusinessFinance #TaxDebt #ATO #Refinance #Cashflow #NonBankLending #FinanceWithEsha