A guide for Australian business owners
ATO debt in 2026
What it costs, what the ATO can do, and your options.
11.51%
General interest charge a year, October to December 2026.
$35.9b
Small business collectable debt at 2024-25, 66.1% of the total.
64,342
Director penalty notices the ATO issued in 2024-25.
Every figure comes from the ATO or the Auditor-General and is listed at the back. Figures as at 2 November 2026. General information only.
Guide for Australian business owners
ATO debt in 2026: what it costs, what the ATO can do and your options
Plain-English answers, with every figure traced to the ATO or the Auditor-General.
11.51%
General interest charge a year, October to December 2026. Reset every quarter.
$35.9b
Owed to the ATO by small business at 2024-25, 66.1% of all collectable debt.
64,342
Director penalty notices the ATO issued in 2024-25, across all taxpayers.
Before you start
What this guide is
It explains how the ATO charges interest on tax debt, what the ATO can do to recover it, and the options business owners have. It is general information about how the system works. It is not financial, credit, tax or legal advice, and it takes no account of your circumstances. Your accountant or registered tax agent knows your position. This guide does not.
1. Why ATO debt costs more than it used to
Why ATO debt costs more than it used to
For years, interest the ATO charged on a late tax debt was a deductible business expense. For interest incurred on or after 1 July 2025 it is not. Under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, neither the general interest charge (GIC) nor the shortfall interest charge (SIC) can be claimed as a deduction.
So the cost of carrying a tax debt rose without the rate moving at all. Two details matter more than the headline.
- It is not grandfathered. It applies to interest incurred from 1 July 2025, even if the underlying debt relates to an earlier year. A debt from 2022 that is still accruing interest today is accruing non-deductible interest.
- Earlier interest is unaffected. Interest incurred before 1 July 2025 remains deductible for 2024-25 and earlier income years.
What the change is worth in cash
Take a company with a $50,000 tax debt held for a year. At this quarter's rate it accrues about $6,098 of GIC. Here is what it cost after tax before the change, and what it costs now.
| Company tax rate | Cost before 1 July 2025 | Cost now | Difference |
|---|---|---|---|
| 25% | $4,574 | $6,098 | +33% |
| 30% | $4,269 | $6,098 | +43% |
An illustration at the current rate held constant for a year. For a sole trader or partner the deduction was worth their own marginal rate, so the difference is not the same.
2. What the interest adds up to
What the interest adds up to
The ATO charges 11.51% a year for the October to December 2026 quarter, applied as a daily rate of 0.03153425% that compounds daily. It was 11.43% for July to September 2026 and 10.96% for April to June 2026.
Because it compounds daily, interest is charged on interest already added, not only on the original debt. Here is what it adds over twelve months.
| Debt | Interest in 12 months | Added on day one |
|---|---|---|
| $20,000 | $2,439 | $6.31 |
| $50,000 | $6,098 | $15.77 |
| $100,000 | $12,197 | $31.53 |
The same $50,000 debt, left for longer
After 1 year
$6,098
Balance $56,098
After 2 years
$12,940
Balance $62,940
After 3 years
$20,617
Balance $70,617
Illustrations at the current rate held constant and compounded daily over a 365 day year. Not a forecast, because the rate resets every quarter.
The ATO can remit GIC in some circumstances. The rules for remission have not changed, but the ATO assesses each request carefully and there is no guarantee. Your tax agent can make the request.
3. What the ATO did last year
What the ATO did last year
The Auditor-General reviewed how the ATO manages small business collectable debt (Report No. 45 of 2025-26). These are collection actions the ATO actually took in 2024-25, not powers held in reserve. The counts cover all taxpayers, not only small business.
64,342
Director penalty notices
Can make a company director personally liable for certain unpaid amounts, such as PAYG withholding and super guarantee charge.
15,199
Garnishee notices
Direct a third party that holds money for you, or owes you money, such as your bank or a customer, to pay it to the ATO.
29,049
Intent to disclose notices
A written warning that the ATO may report your business tax debt to credit reporting bureaus.
24,533
Debts disclosed to credit bureaus
Business tax debts the ATO actually reported.
For scale, small business owed the ATO $35.9 billion of its $54.2 billion in collectable debt at 2024-25. That is 66.1% of the total, and up $19.4 billion (118%) since 2018-19. The Auditor-General rated the ATO's management of that debt as partly effective. That is a finding about the ATO's own processes, not about any individual business.
4. When a tax debt can reach your credit file
When a tax debt can reach your credit file
It is not automatic, and the size of the debt alone does not trigger it. The ATO may report a business tax debt to credit reporting bureaus only if all four of these apply.
- 1The business has an Australian Business Number and is not an excluded entity. Deductible gift recipients, complying super funds, registered charities and government entities are excluded.
- 2It has one or more tax debts, and at least $100,000 of it is overdue by more than 90 days.
- 3It is not effectively engaging with the ATO to manage the debt.
- 4It has no active Tax Ombudsman complaint about the ATO's intention to report the debt.
Before reporting, the ATO sends a written notice. From receiving it you have 28 days to act. If you pay the debt in full or start effectively engaging, you no longer meet the criteria and the ATO asks for the information to be removed from your credit report.
Meeting the criteria does not guarantee disclosure. The ATO may decide not to report in exceptional circumstances outside your control, such as a serious illness or a natural disaster. Cash flow problems and financial hardship are not generally treated as exceptional circumstances.
5. Your options, side by side
Your options, side by side
None of these is automatically best. Which fits depends on your cash flow, your trading history and what the debt is costing you.
| Option | What it does | What to know |
|---|---|---|
| Pay in full | Stops the interest and ends recovery action. | Needs the cash. Paying sooner always reduces total interest. |
| ATO payment plan | Spreads the debt over instalments and keeps you out of recovery action while you comply. | GIC generally keeps accruing but falls as the balance falls. If the plan defaults the full overdue balance can become payable immediately. New debts must be paid on time or placed on a separate plan. |
| ATO interest-free plan | Lets some small businesses pay overdue activity statement amounts over 12 months with the interest remitted. | You may be eligible if turnover is under $2 million, the amounts are $50,000 or less, overdue for up to 12 months, you can show viability, and your lodgement history is clean. Activity statement amounts only. |
| Ask for GIC remission | Asks the ATO to cancel some or all of the interest. | Assessed case by case. No guarantee. |
| Refinance with a lender | A lender pays the ATO in full and you repay the lender. | Has its own rate, fees and conditions, which can be higher or lower than the GIC. Subject to lender approval and does not suit every business. |
| Do nothing | Nothing. | Interest keeps compounding, it is not deductible, and the recovery actions in section 3 stay available. |
Three questions to answer first
- 1How long would it realistically take to clear the debt out of trading income, not out of one good month?
- 2Over that period, what does each route cost in total, including fees, not just at the headline rate?
- 3What happens to the business when the next BAS falls due part way through?
6. How an ATO refinance works
How an ATO refinance works
Finstead is a commercial finance broker, not a lender. We arrange a facility from our lender panel that pays the ATO in full, so the debt moves from the ATO to a lender. It usually runs in four steps.
- 1Get the exact figure. Your ATO payout figure, by debt type, from your ATO online services account or your tax agent.
- 2Assemble the file. Recent financials, BAS and bank statements, and details of any security.
- 3Match to lenders. Only some lenders fund ATO positions, and they differ on security, trading history and speed. Finstead takes the file to those whose criteria fit.
- 4Settle. The lender pays the ATO directly. You repay the lender instead.
Where it can make sense
- The debt is large and the interest is compounding
- A payment plan has lapsed or been refused
- Recovery action is under way or threatened
- The business can service a new facility from trading income
Where it may not
- The business cannot meet repayments on the new facility
- An interest-free ATO plan already fits the debt
- The new facility needs security you cannot or will not provide
- The total cost, with fees, is higher than the alternative
The ATO itself says to get advice from a registered tax agent before using third-party finance to pay a tax debt. We agree. Speak to your accountant first.
Recent ATO debt refinances arranged by Finstead
Hospitality · NSW
A$2M-2.5M
Arranged a private credit refinance to clear the ATO debt in two weeks.
The business had defaulted on its ATO payment plan and was facing a Director Penalty Notice (DPN) and garnishee notices.
Transport · SA
A$500k-600k
Arranged an unsecured refinance to clear the ATO debt in six days.
The ATO refused a new payment plan when the latest BAS was lodged, leaving the business without a way to stay on top of the debt.
Anonymised, amounts shown as bands. Past results do not guarantee future outcomes. Every case is assessed on its own facts.
7. One date to be aware of
One date to be aware of
30 June 2027
On 9 October 2026 the ATO confirmed it will keep accepting credit card payments for tax until 30 June 2027. After that, taxpayers wanting to pay by card will need a third-party payment provider, which charges its own fees. If a payment plan is linked to a credit card, plan a new payment method before the first instalment after that date.
8. What to have ready
What to have ready
- Your ABN, entity type and whether you are registered for GST
- The total owed, by type: BAS, PAYG withholding, super guarantee charge, income tax
- How much is overdue, and for how long
- Whether you have a payment plan and whether it is current
- Whether you have had an intent to disclose notice or a director penalty notice, and when
- The last two years of financials and your latest BAS lodgements
- Three to six months of business bank statements
- What the business can actually pay each month out of trading income
Common questions
The general interest charge is 11.51% a year for the October to December 2026 quarter, charged as a daily rate of 0.03153425% and compounding daily. The ATO resets it every quarter, so check ato.gov.au for the current figure.
9. Where every figure comes from
Where every figure comes from
- ATO, General interest charge rates11.51% a year and 0.03153425% a day for October to December 2026; 11.43% for July to September 2026; 10.96% for April to June 2026.https://www.ato.gov.au/tax-rates-and-codes/general-interest-charge-rates
- ATO, Denying deductions for ATO interest chargesTreasury Laws Amendment (Tax Incentives and Integrity) Act 2025: GIC and SIC incurred on or after 1 July 2025 are not deductible.https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/deny-deductions-for-ato-interest-charges
- ATO, Reminder on interest deductibility changes from 1 JulyPay on time, payment plans, remission and seeking tax advice before using third-party finance.https://www.ato.gov.au/media-centre/ato-reminder-on-interest-deductibility-changes-from-1-July
- ATO, Disclosure of business tax debtsThe criteria for reporting to credit reporting bureaus and the 28 day notice.https://www.ato.gov.au/disclosurebusinesstaxdebt
- ATO, Payment plansHow payment plans work, interest while on a plan and the effect of defaulting.https://www.ato.gov.au/general/paying-the-ato/help-with-paying/payment-plans/
- ATO, Interest-free payment plans for overdue activity statement amountsEligibility for small businesses and how remission of interest works.https://www.ato.gov.au/individuals-and-families/paying-the-ato/help-with-paying/payment-plans/alternative-payment-plans
- ATO, Credit card transition period extended to 30 June 2027Announced 9 October 2026.https://www.ato.gov.au/media-centre/ato-extends-transition-period-for-taxpayers-using-credit-cards-until-30-june-2027
- ANAO, Auditor-General Report No. 45 of 2025-26Small business collectable debt and the ATO's 2024-25 collection actions (paragraph 1.18).https://www.anao.gov.au/sites/default/files/2026-06/Auditor-General_Report_2025-26_45.pdf
Figures checked against these sources on 2 November 2026. Where a number is an illustration rather than a published figure, the page says so. Finstead Capital Pty Ltd, ABN 51 638 390 182, Australian Credit Licence 530764. Finstead is a broker, not a lender, and does not provide tax, legal or financial advice. Any finance is subject to lender approval, eligibility criteria and the lender's own terms, interest and fees. Nothing in this guide is a recommendation to take out finance, enter a payment plan or do anything else with your tax debt. Speak to your accountant or registered tax agent about your own position.
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