What happens if you don't pay GST?
Short answer
Unpaid GST is treated more seriously than most tax debts. Interest of 11.43% per year starts the day after the BAS due date, and because GST is money collected from customers, the ATO lists letting it go unpaid as a specific trigger for firmer action. For companies, unpaid GST can be shifted onto directors personally through a director penalty notice. It cannot be released for hardship.
Why the ATO treats GST differently
Income tax is your money. GST is, in the ATO's view, the customer's money that you are holding on trust until the BAS is due. The ATO's firmer action page names businesses that allow GST, PAYG withholding and employee super to go unpaid as a group it is more likely to move against. That is not a threat, it is a queue priority.
Three practical consequences follow:
- No hardship release. Serious hardship release is available for income tax, but not for GST, PAYG withholding or super guarantee charge. A BAS debt has to be paid, negotiated or dealt with through insolvency.
- Director liability. Since 2020, unpaid GST is a director penalty debt. If your company does not pay, the ATO can make you personally liable with a DPN. If the BAS was lodged more than three months late, the penalty is locked down and only payment removes it.
- Monthly reporting. Since April 2025 the ATO can move persistently non-compliant small businesses from quarterly to monthly GST reporting for at least 12 months.
What happens, step by step
| Stage | What it looks like |
|---|---|
| Day after due date | GIC begins compounding daily. Any refund or credit is offset against the debt. |
| First weeks | SMS, letters, phone calls. A payment plan is offered. |
| Ongoing non-engagement | Referral to a collection agency; for company debts of $100,000 or more overdue 90 days, a 28 day notice before credit bureau disclosure. |
| Firmer action | Garnishee of your bank account or customers; DPN to directors; possible shift to monthly BAS. |
| Legal action | Statutory demand, then a winding up application for companies; bankruptcy proceedings for sole traders. |
The speed depends on your behaviour more than your balance. Our ignoring ATO debt page walks through the full timeline.
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If you are a sole trader
There is no company between you and the debt, so GST is already your personal debt. No DPN is needed. The ATO can garnishee your personal bank account and, at the far end, issue a bankruptcy notice. The upside is that a sole trader's GST debt is provable in bankruptcy and is generally released on discharge, which is one reason it is worth understanding all the options before things reach that point. See sole trader ATO debt.
Whether you trade through a company or in your own name, the same move helps: lodge the BAS on time even if you cannot pay it. Lodging on time keeps a future DPN out of lockdown, keeps the failure to lodge penalty off the account and gets you access to a payment plan.
What to do next
- Lodge any outstanding BAS now, even if you cannot pay. Late lodgement is what locks down a director penalty.
- Set up a payment plan for the GST if the total ATO debt is under $200,000, or call 13 11 42 if it is more.
- If the company cannot realistically clear the debt, get advice on restructuring before a DPN or statutory demand arrives.
Related questions
Can I get a payment plan for GST debt?
Yes. GST and other BAS debts can go into a standard ATO payment plan, online for total debts up to $200,000. Interest keeps accruing inside the plan unless remitted. A plan does not remove a director penalty that has already been issued, but it does stop most other firmer action.
Is unpaid GST a criminal offence?
Not paying is a civil debt matter, not a crime. Failing to lodge the BAS at all is different: the ATO can prosecute for not lodging. Deliberately falsifying a BAS is fraud. Owing GST you cannot pay, while lodging honestly, is a debt problem and is handled as one.
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