Can I refinance my home loan to pay ATO debt?
Short answer
Often yes, if you have enough equity and can service the larger loan. Lenders typically want the ATO paid directly at settlement rather than cash released to you. The rate on a home loan is usually well below the ATO's 11.43% general interest charge, which is no longer deductible. The trade-off is that unsecured tax debt becomes debt secured on your home. The home loan guide goes deeper.
Why the maths can work
Two things changed the sums. First, GIC is 11.43% a year for the July to September 2026 quarter and compounds daily. Second, GIC incurred from 1 July 2025 is no longer tax deductible, so for a business the true cost is even higher than the headline rate. A home loan rate several points below that, spread over a long term, can cut the interest bill substantially.
That is the case for. The case against is that a refinance usually comes with costs: discharge and application fees, possibly lender's mortgage insurance if the loan-to-value ratio climbs, and a higher rate if a specialist lender is needed. Spreading a debt over 25 years also means paying interest for far longer unless you pay it down early. Tax debt loan vs payment plan sets the two side by side.
What lenders typically want to see
- Enough equity that the new loan stays within their loan-to-value limits.
- Income that services the bigger loan under their assessment rate, with the ATO debt gone rather than still counted.
- Every tax return and BAS lodged, and an ATO statement showing the exact payout figure.
- The ATO paid at settlement from loan funds. Most lenders will not release cash and trust you to pay it.
- No business debt listed on your credit file. Where one is, major banks typically decline and specialist lenders price for the risk.
Sole traders and directors are usually asked for more paperwork because the tax debt and the business income are linked. A lender wants to see that the debt was a one-off, not a habit that will rebuild next quarter.
Weighing a refinance against the ATO?
Get the numbers side by side before you put the house on the line. Free and confidential.
The real risk: making tax debt secured
THINK BEFORE YOU SECURE IT
ATO debt is unsecured. The ATO rarely moves directly against a family home and usually negotiates. A home loan lender does not need to negotiate; miss enough repayments and the path to a forced sale is short.
So the question is not only whether a refinance is cheaper, but whether your income is stable enough to carry it. If cash flow is the reason the debt built up, moving it onto the house without fixing the cause can turn a manageable problem into an unmanageable one. An ATO payment plan with a request for GIC remission is the unsecured alternative worth pricing first.
This site does not arrange finance. A licensed broker can tell you which lenders accept a payout to the ATO; an accountant or financial counsellor can tell you whether you should.
What to do next
- Get your exact ATO payout figure and lodgement status from ATO online services or your agent.
- Ask a licensed broker for the all-in cost of a refinance, including fees and any change in rate, and compare it with a payment plan after possible GIC remission.
- Before signing, be honest about whether your income can carry the bigger repayment if the business has a slow quarter.
Related questions
Will a lender pay the ATO directly at settlement?
Usually that is how they insist on doing it. The ATO payout figure is treated like any other debt being refinanced, and the funds go to the ATO's payment reference number at settlement. This protects the lender from lending against a debt that is then not cleared.
Is the interest on a refinance used to pay tax deductible?
It depends on what the tax debt relates to. Interest on borrowings used to pay a business tax debt may be deductible, while interest on money borrowed to pay personal income tax generally is not. The deductibility of the loan interest, not just the rate, is a question for your accountant before you refinance.
Weighing a refinance against the ATO?
Get the numbers side by side before you put the house on the line. Free and confidential.
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