Should I get a loan to pay the ATO?
Short answer
Sometimes, but it is not the default answer. A loan is worth considering when its all-in cost is clearly below the ATO's 11.43% general interest charge, which is no longer deductible, and when you can comfortably carry the repayments. It is a poor fit when the loan is expensive, secured on your home, or replaces a plan the ATO would have given you anyway. Start with the borrowing guide.
Four questions that usually decide it
- What is the true cost of each option? GIC is 11.43% a year, compounding daily, and since 1 July 2025 it is not deductible. Compare that with the loan's rate plus establishment fees, plus any ongoing fees, over the period you would actually take to repay.
- Could the ATO cost less than it looks? A kept payment plan plus a successful GIC remission request can bring the effective interest down. A loan locks in its rate; a remission can wipe part of the interest.
- Is the loan secured? Tax debt is unsecured. A loan against your home is not, and the lender's remedies are faster than the ATO's.
- Can you service it? A loan repayment is fixed. An ATO plan can sometimes be renegotiated if things change. If cash flow is unreliable, the flexible option has value beyond the rate.
When a loan tends to fit, and when it does not
A loan tends to make sense when the debt is large, the rate on offer is well below GIC, your income is steady, and the ATO has refused or cancelled a plan, or a plan is not enough to stop credit reporting or a director penalty notice deadline. Paying the ATO out also ends the risk of a garnishee and removes the debt from the ATO's collection cycle entirely.
A loan tends not to fit when it is a short-term unsecured business loan priced above GIC, when it would mean a credit card balance you cannot clear, or when it treats the symptom while the business keeps generating new BAS debt each quarter. Borrowing to pay one quarter and then falling behind on the next leaves you with two debts. Loan vs payment plan compares the two properly.
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Who to ask before you decide
This site does not arrange finance or recommend lenders, and a lender is not the right person to tell you whether borrowing is wise. Before you sign anything:
- Ask your accountant whether the loan interest would be deductible in your situation and what the after-tax comparison looks like.
- Ask the ATO, or your agent, what plan and remission you would be offered. That is your baseline.
- If the debt is a company debt, make sure the company is actually viable. A loan into an insolvent company can make a director's position worse, and a formal rescue option may serve you better.
- If you cannot afford either, an ATO payment plan at whatever level you can honestly sustain is still better than silence.
What to do next
- Write down the all-in cost of any loan you are considering: rate, fees and term, and whether it is secured.
- Ask the ATO or your agent what payment plan and GIC remission you would get, so you have a real comparison.
- Run both options past your accountant, including whether the loan interest would be deductible.
Related questions
Is it better to pay the ATO or the bank first?
It depends on which debt is more expensive and which creditor has the sharper remedies. GIC at 11.43% non-deductible is often the more expensive debt, but a secured lender can act on your home faster than the ATO. Most people keep secured repayments current and negotiate with the ATO on the rest, rather than the reverse.
Can I borrow from family to pay the ATO?
Yes, and the ATO does not care where the money comes from. A family loan avoids lender fees and credit checks, but it is worth putting in writing, with an agreed repayment and interest, so that a tax problem does not become a family one. If the amount is large, ask an accountant about any tax consequences of interest paid or forgiven.
Not sure whether to borrow or negotiate?
Get both options priced before you commit to either. Free and confidential.
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