Tax debt loan vs ATO payment plan: which is cheaper?
Short answer
Neither is automatically cheaper; it depends on the loan's rate and fees against 11.43% GIC. An ATO payment plan charges general interest at 11.43% a year, has no fees, is unsecured and can sometimes have interest remitted. A loan is cheaper only when its all-in cost, after any tax deduction on the interest, comes in below that. Home loan rates usually do; short-term unsecured business finance often does not.
The two options side by side
| ATO payment plan | Loan to pay the ATO | |
|---|---|---|
| Interest | GIC 11.43% a year, compounding daily, reviewed quarterly | Lender's rate, fixed or variable, set by your file |
| Fees | None | Application, valuation, ongoing and exit fees vary |
| Deductible? | No, for GIC incurred from 1 July 2025 | Sometimes, if borrowed to pay a business tax debt; ask your accountant |
| Security | Unsecured | Often secured on your home, or backed by a director's guarantee |
| Flexibility | Can be varied or renegotiated; interest may be remitted | Fixed repayments; early payout fees possible |
| Credit file | Not reported for individuals; a kept plan stops business reporting | Enquiry and new account appear on your file |
The deductibility row is where the comparison has shifted. Because GIC is no longer deductible, a business comparing a deductible loan at a lower rate is comparing against an effective GIC cost well above 11.43% once tax is taken into account.
A worked comparison
Take a $50,000 debt repaid over two years. On a payment plan, GIC at 11.43% costs roughly $6,000 in interest over the term if instalments are steady, with no fees. If the ATO remits half of that interest after a well-founded remission request, the cost falls to around $3,000.
A loan at a rate several points below GIC would charge less interest over the same term, but add establishment fees and any ongoing fees, and check whether the interest is deductible in your situation. If it is a business debt and the loan interest is deductible, the after-tax gap widens in the loan's favour. If it is a personal income tax debt, neither the GIC nor the loan interest is deductible and it comes down to the raw rate and the fees.
The figures above are illustrative arithmetic, not quotes. Rates presented as offers should come from a lender, not from a website, and this site does not arrange finance.
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What the rate does not capture
- Security. A loan on your home puts the house behind the tax debt. The ATO, by contrast, rarely goes near a family home while you are engaging.
- Remission. Only the plan carries the chance of interest being reduced. A loan's interest is what it is.
- Default consequences. Two defaulted plans in 12 months closes the ATO's online channel; a defaulted loan lands on your credit file and can trigger enforcement.
- Finality. A loan pays the ATO out completely, ending garnishee risk and, for directors, the exposure that comes with an unpaid company debt. Some people pay for that certainty.
The borrowing guide covers what lenders typically look at, and should I get a loan to pay the ATO works through the decision.
What to do next
- Ask the ATO or your agent what plan term you would be offered and whether a GIC remission request is realistic.
- Get any loan priced in full: rate, all fees, term and security, and whether the interest would be deductible for you.
- Compare total cost over the same repayment period, then weigh the security and flexibility differences with your accountant.
Related questions
Can I pay out an ATO payment plan early with a loan?
Yes. A payment plan has no early payout penalty, so if you later secure cheaper finance you can pay the balance in full and the plan simply ends. Interest stops accruing once the balance is cleared, so a plan now and a refinance later is a common sequence.
Does the ATO offer loans or interest-free periods?
No. The ATO is not a lender and does not offer interest-free plans as a product, though it can remit GIC in specific circumstances, which has a similar effect for the remitted portion. Anyone advertising an ATO loan is a private lender, not the ATO.
Loan or payment plan? Get the real comparison
Have the numbers laid out before you commit to either. Free and confidential.
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