ATO debt and government tenders: can you still win a Commonwealth contract?

You’ve found the tender. It’s a Commonwealth job, it suits your crew, and the closing date is three weeks out. Then someone in the office reads the conditions and spots a line about a “statement of tax record”. The business owes the ATO money. Does that kill the bid?

Usually not, as long as you deal with it before the closing date. For Commonwealth open tenders worth $4 million or more, every tenderer needs a satisfactory statement of tax record (STR) from the ATO. Overdue ATO debt of $10,000 or more makes it unsatisfactory, unless the debt is on a payment plan or under formal dispute. Lodgements and registrations count too. Here’s how the test works and how to pass it.

What is a statement of tax record, and when do you need one?

An STR is a short report the ATO issues about your tax compliance. It exists because of the Shadow Economy Procurement Connected Policy, which Treasury introduced in 2019 and revised for tenders closing on or after 1 October 2024.

You need one when all of these apply:

• The buyer is a non-corporate Commonwealth entity. That covers federal departments and most agencies. Corporate Commonwealth entities and Commonwealth companies are encouraged to adopt the policy, but aren’t required to.
• It’s an open tender run under the Commonwealth Procurement Rules. Limited tenders, where the agency approaches suppliers directly, don’t require an STR.
• The estimated value is $4 million or more, including GST. That’s the value of the whole approach to market, not your slice. If a panel or multi-contract tender adds up to $4 million or more, every respondent needs an STR, even if your own contract would be much smaller.

The tender documents should say clearly whether an STR is required. If they do, read it as a gate, not a formality. Treasury’s guidelines say a tenderer who fails to supply a valid, satisfactory STR by the due date is out of further consideration.

The three tests your ATO record has to pass

The policy guidelines set out exactly what the ATO checks. Your STR is satisfactory if, when the ATO runs the check:

Test	What the ATO looks for	Where owners trip up
Registrations	ABN, GST and TFN registrations up to date	A GST registration left on an old entity, or a new trust never registered
Lodgement	At least 90% of income tax returns, FBT returns and BAS due in the last four years lodged	A year or two of BAS left unlodged during a rough patch
Debt	No overdue ATO debt of $10,000 or more	A BAS debt that crept past the threshold without anyone noticing

Two exceptions to the debt test matter a great deal:

1. A payment plan with the ATO satisfies it. The guidelines say plainly that if you’ve entered into a payment plan, you meet the criterion.
2. Debt under a formal objection, review or appeal is excluded. If you’re genuinely disputing an amount through the Part IVC process, it doesn’t count against you. Our guide to disputing an ATO debt explains how that process works and what it doesn’t pause.

Lodgement extensions agreed with the ATO don’t count against you either. Late lodgements without an extension do.

How the timing works — and the four-day trap

The ATO aims to issue an STR within four business days of an application through Online services for business. It arrives through the same service, and the ATO’s STR page walks through the steps. A corporate trustee without an ABN has to apply by phone.

Four days sounds quick. The trap is what happens if the result comes back unsatisfactory. The ATO tells you why on the taxpayer report, but you then have to fix the cause, give the ATO’s systems time to show the change, and apply again. If you only find out in the last week before closing, that can be too late.

A few other timing rules worth knowing:

• Validity: an STR lasts 12 months from issue. If your business has less than four years of Australian tax history, it lasts six months.
• Contract award: the agency must hold a valid STR for you when it signs the contract. If yours has expired by then, you’ll be asked for a fresh one, and the ATO will check your record again at that date.
• Mistakes in your submission: if an agency decides a missing STR was an unintentional error, it can give tenderers 10 business days to correct it. That’s discretionary, not a right, so don’t plan on it.

Treasury’s advice is to apply early and keep a valid STR on hand even before a tender is released. If you tender regularly, that’s simply good housekeeping.

Owe the ATO more than $10,000 and have a tender closing soon? See if you qualify for funding to clear the overdue balance first. The enquiry takes about a minute.

Payment plan or pay it off? The choice that matters after you win

On paper, a payment plan is the easy route. Set one up, apply for your STR, and the debt test is ticked. Our ATO payment plan guide covers how plans are set up and the conditions the ATO attaches.

The problem is what comes next. Successful tenderers must maintain a valid, satisfactory STR for the whole contract and produce it when the agency asks. Government contracts often run for years. If your plan defaults halfway through, perhaps because a progress payment ran late or a new quarter’s BAS wasn’t paid on time, your next STR could come back unsatisfactory, and the contract will set out what happens then.

So the honest comparison looks like this:

• A payment plan keeps cash in the business today, but general interest charge keeps accruing on the plan balance, and GIC hasn’t been tax deductible since 1 July 2025. Every new BAS and tax payment also has to be met on time alongside the instalments.
• Clearing the debt with funding turns the ATO balance into a single, scheduled loan repayment. The debt test is then a non-issue, and there’s no plan for a late payment to knock over in the middle of the contract.

Neither is right for everyone. Our payment plan vs loan calculator lets you put an estimated GIC cost next to a loan quote you hold, so the decision comes down to numbers rather than guesswork.

Don’t forget your subcontractors

This catches a lot of head contractors out. Under the policy, you must obtain and hold valid, satisfactory STRs for every first-tier subcontractor delivering work under a Commonwealth contract of $4 million or more. If they’re known when you tender, you hold their STRs at tender time. If you engage them later, you get their STR when they sign on. The agency can ask to see those records at any time, and can require subbies to stay satisfactory for the life of the contract.

In practice, that means:

• Ask early. Put the STR request in your subcontractor prequalification pack, not in the week the job starts.
• Have a back-up. If your preferred concreter or electrician owes the ATO more than $10,000 and isn’t on a plan, you may not be able to use them on that job.
• Check your own structure. Partnerships need an STR for the partnership and each partner directly involved. Trusts need one for the trust and the trustee. Joint ventures need one from each party. A subsidiary in a tax consolidated group needs one from itself and the head company.

If you’re a subbie yourself, the same pressure flows down to you. A clean ATO record is becoming part of what makes you easy to hire on bigger jobs. Builders and trades with tax debt can read our page on construction company ATO debt for the funding angles that suit progress-claim businesses.

What a satisfactory STR doesn’t prove

One line in Treasury’s guidelines is worth remembering: a satisfactory STR “is not evidence of financial viability”. Agencies still run their normal due diligence, which can include looking at your financial position and capacity to deliver.

That means scraping through the STR test isn’t the whole story. A business carrying large tax arrears, a stretched overdraft and a payment plan may pass the ATO check yet still look thin when an evaluator reviews its financials. A balance sheet with the ATO debt refinanced into a properly structured loan can read very differently from one with overdue tax and penalties stacking up.

A worked example: the civil contractor and the four-week window

This is an illustrative scenario, not a real client.

A civil and earthworks company in regional Queensland, with 22 staff, wants to bid on a Commonwealth facilities package estimated at around $7 million. The tender closes in four weeks and calls for a satisfactory STR.

The director applies straight away. Four business days later the STR comes back unsatisfactory, with two reasons: the company has about $64k of overdue BAS and PAYG withholding debt, and two quarterly BAS from the previous year were never lodged.

The accountant lodges the two missing BAS within a week, which brings lodgement back above the 90% mark. The director then has two ways to fix the debt. A payment plan would work for the STR, but the director worries about keeping it intact for a three-year contract with irregular progress payments. Instead, the company takes an unsecured business loan sized on its turnover and bank statements. The overdue balance is paid, the ATO account goes to nil, and a fresh STR application comes back satisfactory with more than a week to spare before closing.

The tender result is still up to the evaluators, of course. But the bid goes in complete. And with the overdue PAYG withholding paid, the directors have also closed off a source of personal exposure under the director penalty rules.

Tender closing and the ATO balance is in the way? Let’s sort it

A big government tender is the kind of opportunity that can change the size of a business. It’s frustrating to see an ATO balance stand between you and a fair shot at it. We work with business owners who owe the ATO every week, and we’re comfortable with these files where many lenders aren’t.

Where the numbers stack up, we can arrange property-secured funding from $20,000 to $5,000,000, or unsecured and cash-flow options for trading businesses, typically $5,000 to $500,000. Property-secured funding is possible in as little as 24 hours, and where it’s arranged at settlement the funds can be paid straight to the ATO. Our unsecured loans for ATO debt page explains how lenders size those facilities.

Starting is simple. The enquiry form takes around 60 seconds and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so you won’t be fielding calls from brokers you’ve never heard of. A real person who understands ATO debt reads your enquiry and calls you about your situation.

Please fill the form in accurately: your total ATO balance, how much of it is overdue, whether any lodgements are behind, whether you own property, and your tender closing date. With those details we can tell you on the first call whether funding gets you there in time, or whether a payment plan is the smarter move for your bid.

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