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If your business cannot pay an Australian Taxation Office (ATO) bill by its due date, do not ignore it. Check exactly what is owed, pay what you can responsibly afford, contact the ATO promptly to discuss a payment arrangement or more time, and keep all tax, activity-statement, payroll and superannuation obligations up to date. The ATO says, “If you can’t pay your debt on time, you may be eligible for a payment plan.” An arrangement is not automatic, and general interest charge (GIC) continues on the unpaid balance.
Start with the bill, not the panic
Before asking for extra time, establish the facts. Open the ATO notice and your ATO online account and record the debt type, amount, due date, account period and any payments already made. Check whether part of the balance is disputed, duplicated or awaiting a credit. A tax professional can help separate a genuine liability from an error, but do not delay contacting the ATO while you investigate.
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Keep copies of notices, account statements, payment confirmations and every conversation with the ATO. A simple chronology makes it easier to explain what happened and to demonstrate that the business is engaging in good faith.
Pay an amount you can genuinely afford
If cash is available, make a responsible payment now. Reducing the principal earlier shortens the period over which GIC can accumulate. Do not empty the account needed for wages, essential suppliers, upcoming GST or PAYG withholding, or compulsory superannuation. A token payment that causes another missed obligation is not a workable solution.
Contact the ATO before the due date if possible
Call or use the relevant ATO business service as soon as you know the due date cannot be met. Early contact gives you time to assemble figures and discuss an arrangement before reminders escalate. Explain the amount you can pay immediately, the amount you propose to pay regularly and the cash-flow reason for the shortfall. The ATO may ask for financial information, especially when a company is seeking an arrangement.
Offer an instalment plan the business can sustain
Base the proposal on a written cash-flow forecast rather than the instalment you hope will be affordable. Include expected sales receipts, wages, rent, supplier payments, GST, PAYG withholding, superannuation, loan commitments and seasonal changes. Leave a buffer for unexpected costs. The ATO’s guidance emphasises affordability and the need to meet future obligations; agreeing to a figure that will fail in a few weeks can put the business in a worse position.
A payment plan changes the timing of payment; it does not cancel the debt or freeze interest. Ask the ATO to confirm the proposed amount, frequency, start date, payment method and conditions. Read the terms carefully and diarise every instalment. If the forecast changes, contact the ATO before a payment is missed rather than waiting for a default notice.
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The ATO’s current indexed guidance describes different routes according to the amount of eligible business debt. Thresholds and online services can change, so verify the options shown in the live ATO account when you act.
| Eligible business debt | Route described by the ATO | What to do |
|---|---|---|
| $200,000 or less | Online services for business, a registered tax or BAS agent, or the ATO’s automated business enquiry service | Check eligibility, prepare the proposed instalments and submit the request or ask your registered agent to do so. |
| More than $200,000 | Phone discussion with the ATO | Call the ATO to discuss available options and have current financial information ready. |
The $200,000 figure is the threshold stated in the ATO payment-plan guidance for the online, agent and automated-service route. It is not a promise that every debt below that amount will be approved. The ATO still considers the circumstances, the debt and whether the proposed payments are realistic.
Information to have ready
- Australian business number, tax file details and the relevant account or notice numbers.
- The total outstanding amount, what you can pay immediately and the proposed instalment frequency.
- A short explanation of the cash-flow problem and when conditions are expected to improve.
- Current bank, sales, debtor, creditor, payroll and tax information if requested.
- Evidence that future activity statements, returns and superannuation payments have been scheduled.
Keep lodging even when payment is difficult
Payment trouble does not remove the obligation to lodge activity statements and tax returns by their deadlines. Lodge accurately and on time, even if you cannot pay the resulting amount in full. Late lodgment can create a separate penalty and leaves the ATO without the information needed to assess your position.
Continue setting aside GST collected from customers and PAYG withholding deducted from employees. Those amounts are collected for the government, not ordinary working capital. Pay superannuation by its required deadlines as well. A payment arrangement for an existing tax debt does not automatically cover new liabilities, and allowing new obligations to build up can lead to the cancellation of an arrangement or stronger collection action.
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GIC applies to overdue amounts, compounds daily and continues while a payment arrangement is in place. Paying sooner, paying a larger amount upfront and shortening an affordable plan all reduce the time during which interest can accrue.
The ATO revises GIC rates quarterly. The rate applying on 13 October 2026 has not been verified here, so do not rely on an old figure displayed in an article, spreadsheet or search result. Check the current ATO rate when calculating the cost of delay.
How GIC is treated for deductions
The ATO says GIC and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible. Interest incurred before that date may still be deductible under the rules applying to the relevant return. Have your tax agent check the treatment for your business rather than assuming every interest charge has the same tax result.
Ask about relief, but do not assume it will be granted
If circumstances were exceptional, explain them clearly and ask the ATO which support may apply. Depending on the facts, you can ask about more time, a payment arrangement, remission of interest or penalties, or another available option. The ATO assesses remission requests in context; it is discretionary and is not an automatic reduction or write-off.
Serious-hardship release is a special-circumstances pathway, not a standard consequence of having a temporary cash shortage. A business should obtain professional advice before relying on it and should continue to meet lodgment obligations while any request is considered.
Compare an ATO arrangement with outside finance
A finance provider may be an alternative source of funds, but the ATO does not establish that external borrowing is cheaper or suitable. Compare the complete cost and the effect on future cash flow before signing anything.
| Decision factor | ATO payment arrangement | Third-party finance |
|---|---|---|
| Total cost | GIC continues on the unpaid ATO balance. | Interest, establishment charges, brokerage and other lender fees may apply; compare the total repayable amount. |
| Affordability | Instalments must fit alongside new tax, payroll and super obligations. | Repayments must fit projected cash flow as well as the continuing tax obligations the borrowing is intended to cover. |
| Speed and certainty | Eligibility and approval are assessed by the ATO; an application is not automatic approval. | Approval, funding time and conditions depend on the provider and the business’s circumstances. |
| Security and guarantees | The ATO may request financial details and imposes arrangement conditions. | A lender may require security, personal guarantees or other covenants. |
| Future obligations | New liabilities still need to be lodged and paid on time. | Debt repayments add another fixed commitment and do not remove tax or super obligations. |
Ask a registered tax or BAS agent to model both options using the business’s actual forecast. Do not borrow merely to make the current bill disappear if the underlying cash-flow gap will create another unpaid bill next quarter.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Know what can happen if the debt remains unpaid
Offsets and follow-up contact
The ATO may contact the business after non-payment and can offset credits or refunds against tax debts. A refund expected from another tax account may therefore not arrive as cash in the bank. Keep checking ATO messages and respond by the stated date.
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Firmer collection action
The ATO says firmer action may follow a refusal to engage, ignored reminders or repeated payment-plan defaults. A failed arrangement is not neutral: it can show that the agreed instalments were not sustainable or that the business is not addressing its obligations. If a payment will be missed, contact the ATO before the due date for that instalment and provide an updated proposal.
Company statutory demands
For a company, an ATO statutory demand can require payment or an arrangement within 21 days. The ATO states that non-compliance may be used as evidence of insolvency in a winding-up application. Treat a statutory demand as urgent legal correspondence: obtain insolvency or legal advice immediately, check the demand for accuracy and do not assume that an informal phone conversation extends the 21-day period.
Use a registered professional when the numbers are unclear
A registered tax agent or BAS agent can review the debt, confirm lodgment status, prepare a realistic cash-flow forecast and, where authorised, set up or negotiate a payment plan. Give the adviser complete information about debts to other creditors, overdue superannuation, director loans, upcoming payroll and disputed assessments. A plan based only on the ATO balance can fail if other compulsory payments are omitted.
Ask the adviser to explain their fee, what they will do, what information they need and whether they are authorised to communicate with the ATO. Professional help is particularly important when the business cannot meet several creditors, has received a statutory demand, or may be insolvent.
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A practical prevention system for the next quarter
- Separate tax cash. Transfer GST collected, PAYG withholding and expected income-tax amounts into a dedicated account or clearly labelled reserve as receipts arrive.
- Use a rolling forecast. Update a 13-week cash-flow forecast weekly, including tax, payroll and super dates rather than treating them as occasional surprises.
- Reconcile monthly. Compare bookkeeping records with ATO account balances, lodged statements, payments and credits. Investigate differences promptly.
- Calendar every deadline. Set reminders well before activity statements, returns, instalments and super payments fall due.
- Set an escalation trigger. If the forecast shows a shortfall, speak to the ATO and your registered adviser before the due date, not after a reminder.
- Review pricing and terms. Check whether customer payment times, deposits, supplier terms and seasonal stock purchases are creating the gap.
Action checklist
- Confirm the debt, due date, account period and any disputed amount.
- Save notices, statements, payment receipts and contact records.
- Pay what can be paid without jeopardising wages, super or upcoming tax obligations.
- Contact the ATO promptly and ask about a payment plan or more time.
- For eligible debt of $200,000 or less, check Online services for business, a registered agent or the automated business service; phone the ATO about larger debt.
- Offer instalments supported by a written cash-flow forecast.
- Lodge all returns and activity statements on time.
- Track GIC using the current quarterly rate and remember that it continues during the arrangement.
- Ask a registered tax or BAS agent to review affordability, remission possibilities and any finance alternative.
- Respond urgently to statutory demands or other formal collection notices.
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