Clearing ATO debt in 2026: every option, ranked by cost and control

Why this guide exists

If your business owes the ATO, you’ll find plenty of advice online. Much of it is written by someone selling one particular answer — a loan, a restructure, a liquidation, a negotiation service. Very little of it lays out every option side by side, honestly, including the ones where nobody makes money.

That’s what this guide does. We’re a business funder, so you should know where we sit: funding is option seven of ten below. We’ll explain when it’s the right answer and, just as importantly, when it isn’t.

What changed in 2025–26?

Before the options, a quick briefing on the rules that changed recently, because they shift the balance between them:

Change	Date	Why it matters
GIC and SIC no longer deductible	Incurred on or after 1 July 2025	Carrying ATO debt now costs more after tax
Payday Super	From 1 July 2026	Super due within 7 business days of each payday; ATO-assessed SG charge with an uplift starting at 60%
ATO stops accepting credit cards	After 30 November 2026	Card-funded tax payments and card-based plans must change
GIC remission process overhauled	Following the Tax Ombudsman’s March 2026 review	New form; larger requests go to a dedicated team

Two themes run through these changes. Delay is more expensive than it used to be. And the old workarounds — quarterly super, paying the BAS on a card — are closing.

Step 1: Know exactly what you owe

Every option starts with the same document: your ATO statement of account, from Online services for business or your accountant. Split it into:

• Activity statement debt — GST, PAYG withholding, PAYG instalments.
• Income tax debt — the company’s or your own assessment.
• Super guarantee charge — any assessed SG charge.
• GIC and penalties — the interest and penalties added on top.

Then check lodgements. An unlodged BAS hides debt and, for GST and PAYG withholding, late reporting can create a director penalty lockdown. If you’re behind, catching up is the single most protective step available — and it’s free.

Step 2: Separate the taxes that can become personal

For company directors, not all tax debt is equal. PAYG withholding, GST and super guarantee charge are covered by the director penalty regime. If the company doesn’t pay, the ATO can issue a director penalty notice (DPN) and pursue directors personally. Income tax isn’t covered.

Within 21 days of a standard DPN, the penalty is remitted if the company pays in full, appoints an administrator, appoints a small business restructuring practitioner, or begins winding up. But if GST or PAYG withholding was reported more than three months late — or not at all, or estimated by the ATO — the penalty is locked down: only payment in full remits it.

This one rule reshapes the whole ladder below. If lockdown amounts exist, any option that doesn’t pay them leaves you personally liable.

The ladder: every option, ranked

1. Pay in full

Cost: the debt itself. GIC stops from the day you pay. Control: you keep it all.

If you have cash reserves, a property settlement coming, or a large receivable about to land, paying in full is the cheapest outcome. It also removes every director penalty on the amounts paid, stops credit-reporting risk and ends any garnishee notice once the ATO withdraws it.

2. A standard ATO payment plan

Cost: GIC, compounding daily at the ATO’s quarterly rate, and not deductible for amounts incurred from 1 July 2025. Control: you, within the ATO’s terms.

Plans can be set up online for debts under $200,000. Income tax and activity statement debts need separate plans. New obligations must be paid on time, and a plan can default if you miss an instalment, ignore an arrears letter or fail to pay new tax — at which point the whole overdue balance becomes payable.

Best for: moderate debts you can clear within a reasonable period while keeping current with new tax. Watch out: a plan doesn’t remit director penalties. See ATO payment plans for business.

3. The interest-free plan

Cost: nothing beyond the debt, if you keep to it — GIC is remitted. Control: you.

Available for small business activity statement debt where turnover is under $2 million, the debt is $50,000 or less and no more than 12 months overdue, lodgements are current, there’s been no more than one plan default in 12 months, the business can’t obtain finance through normal channels, and it can demonstrate viability. Paid by direct debit over 12 months.

Best for: exactly the businesses it’s designed for. If you qualify, it’s very hard to beat. See interest-free ATO plans.

4. A secured ATO plan

Cost: GIC continues. Control: you.

Where a standard arrangement can’t be reached, the ATO may accept security — preferably a registered mortgage over freehold property or an unconditional bank guarantee from an Australian bank — for an instalment plan or deferral. Useful for larger debts, particularly those of $200,000 or more that can’t be set up online. See plans over $200,000.

5. GIC remission

Cost: free to ask. Control: you.

The ATO may remit GIC where there are extenuating circumstances — illness, disaster, a customer’s collapse. Use the ATO’s GIC remission application form, include every circumstance you want considered, and attach evidence. Requests involving more than $2,500 go to a dedicated team. Pursue remission in parallel with dealing with the debt, not instead of it. See GIC remission.

6. Hardship help and deferrals

Cost: free to ask. Control: you.

The ATO can give extra time to lodge or pay in the right circumstances, and refers businesses in difficulty to specialised teams. Release from debt for serious hardship is only available to individuals, and never for GST, PAYG withholding, SGC or director penalties. See hardship help.

7. Funding — borrowing to pay the ATO out

Cost: the loan’s total cost over its term; interest may be deductible (ask your accountant). Control: you keep it all.

A loan pays the ATO in full — where arranged, directly at settlement — and replaces the tax debt with a lender’s terms. Property-secured loans run from $20,000 to $5,000,000 (first mortgages, second mortgages, caveat loans), with funding possible in as little as 24 hours once the lender has what it needs. Unsecured options for trading businesses typically run from $5,000 to $500,000, sized on turnover and bank statements.

Best for: viable businesses where a plan won’t work or has failed; lockdown DPNs; standard DPNs inside 21 days; garnishee notices; debts near the credit-reporting threshold; owners who want to keep control. Not for: businesses losing money with no turnaround in sight. See tax debt loans.

8. Small business restructuring (SBR)

Cost: practitioner fees — ASIC found a median of around $16,000 for the restructuring stage alone, with plan fees on top — plus any adviser fees. Control: you, with practitioner oversight.

Eligible companies (liabilities not over $1 million; entitlements including super paid and lodgements up to date before a plan is proposed; no SBR or simplified liquidation by the company or directors in the past 7 years) can propose a plan paying creditors part of what they’re owed. ASIC’s review found a median return of 20 cents in the dollar. It won’t remit lockdown DPNs. See SBR explained.

9. Voluntary administration

Cost: administrator’s fees. Control: the administrator.

An independent administrator takes control and seeks the best outcome, often a deed of company arrangement. Typically for larger or more complex companies. Lockdown DPNs and personal guarantees survive. See administration vs liquidation.

10. Liquidation

Cost: liquidator’s fees — ASIC reported an average of around $18,000 for standard creditors’ voluntary liquidations with liabilities of $1 million or less — and the business itself. Control: the liquidator.

The company ends. Assets are sold, the liquidator investigates and reports to ASIC, and certain earlier payments can be clawed back. Only 4% of standard smaller liquidations in ASIC’s data paid unsecured creditors a dividend. Lockdown DPNs and guarantees survive. See liquidation and ATO debt.

A decision flow you can use today

1. Is a deadline running? (DPN, statutory demand, wind-up, bankruptcy notice, 28-day credit-reporting letter.) If yes, note the date — it limits which options are realistic.
2. Is any debt locked down? If yes, plan for payment of those amounts.
3. Is the business viable without the debt? If no, get free advice and talk to a registered liquidator. If yes, continue.
4. Do you qualify for the interest-free plan? If yes, start there.
5. Can a standard plan clear the rest within a reasonable time, alongside new tax? If yes, set it up — online if under $200,000.
6. If not — or a plan has failed — compare funding with a secured ATO plan and, if eligible, SBR.
7. Ask for GIC remission on interest that built up unfairly, whatever you choose.

Our ATO debt options checker runs a version of this flow for you and produces a ranked list.

Three illustrative scenarios

The modest BAS debt. A small physio clinic with turnover well under $2 million owes $28,000 of GST from the last two quarters. Lodgements are current; no notices. The interest-free plan fits perfectly. Funding would be unnecessary.

The lockdown DPN. A building company’s director receives a DPN; two quarters of PAYG withholding were lodged five months late. Restructuring or liquidation would leave her personally liable for those amounts. The company is profitable again. A second mortgage pays the locked-down withholding in full; the income tax goes on an ATO plan.

The business that can’t recover. A retailer owes the ATO, its landlord and suppliers far more than it could ever repay. There’s no property and trading is falling. Borrowing would deepen the hole. The right next calls are the Small Business Debt Helpline and a registered liquidator the director has checked.

Who to call — and who to be careful of

Your accountant, the ATO and the Small Business Debt Helpline (1800 413 828) cost nothing and have no stake in your decision. ASIC says the pre-insolvency industry is unregulated, and the ATO warns about advisers who contact you after court action or charge a fee based on a percentage of your debt. Before engaging anyone, read before you call anyone.

Is funding the right rung for you?

If you’ve worked down the ladder and funding looks like the right fit — a viable business, a deadline, a lockdown, or a plan that won’t stretch far enough — see if you qualify. The enquiry takes about a minute and involves no credit check. Your details stay with one team rather than being sprayed across a list of lenders, and a real person who knows ATO debt will call you back. Please give accurate figures for each ATO account and any notices; that’s how we can tell you on the first call whether we’re the right next step, or whether one of the free options above will serve you better.