Do I have to pay something upfront for an ATO payment plan?

How upfront amounts work online

For debts of $200,000 or less, the online system and the self-help phone line calculate an upfront figure based on the debt and the term you choose. The ATO's own words are that you can vary the upfront and instalment amounts above or below the amounts provided, up to certain values. In practice that means:

• the suggested upfront amount is a starting point, not a demand
• you can usually reduce it, but not to zero on every debt, and reducing it tends to increase the instalments or shorten what the system will accept
• the upfront amount is normally due within days of setting the plan up, and missing it is a missed instalment

The ATO's payment plan estimator lets you test combinations before committing. It is an estimate only and does not guarantee the online system will accept the same terms. See how the estimator works.

Negotiated plans: why upfront matters more

Once a plan is being assessed by a person (debt over $200,000, two defaults in 12 months, a recent firmer action warning, or a term past 24 months), the upfront payment does three jobs. It shows the debt is a priority. It reduces the ATO's exposure. And it shortens the plan, which reduces the GIC you pay at 11.43%. Officers do not quote a fixed figure, but a proposal with nothing upfront and a long tail is the one most often refused. Something around 10% to 20% is common in negotiated arrangements; more helps, and any amount beats none. For the larger debt process see payment plans over $200,000.

If you cannot pay anything upfront

Do not invent an upfront figure you cannot meet. A plan that fails on day five is worse than a plan with a small first payment. Options:

• Offer a small upfront and a slightly higher first few instalments rather than nothing. Even a few hundred dollars changes how the proposal reads.
• Try the online system with a reduced upfront amount. For smaller debts it will often accept a lower figure than it suggests.
• Explain the reason on the phone. A one off event, a delayed invoice, a seasonal trough. Say when the cash will arrive and offer a larger payment then.
• Ask about hardship options. If you are an individual or sole trader in serious hardship, a plan may not be the only tool. See ATO debt forgiveness and hardship.
• Secured plan. Where the ATO will not agree to terms otherwise, it can accept a registered mortgage over property or a bank guarantee as security instead of a large upfront amount. This is a serious step and worth advice first.

If the refusal sticks, payment plan rejected covers what to do next.

What to do next

1. Run the ATO's payment plan estimator with the upfront amount you can actually pay this week.
2. If the online system accepts it, set the plan up and pay the upfront amount straight away.
3. If you are negotiating by phone, decide on an upfront figure and a monthly figure before you call, and say both early.
4. If no upfront is possible, explain why and when it will be, rather than promising one you cannot meet.

More questions: 26 ATO payment plans questions answered · Full guide: ATO payment plans