Updated 26 July 2026
In this guide
What ATO debt actually costs in 2026-27
The general interest charge (GIC) for the July to September 2026 quarter is 11.43% a year, calculated daily on a compounding basis. Compounding daily lifts the effective annual cost to roughly 12.1%. The rate resets every quarter under a statutory formula: the 90-day bank bill rate plus 7 percentage points, so ATO debt always prices well above ordinary commercial lending, wherever the rate cycle sits.
Two things changed the equation recently:
- GIC and SIC incurred from 1 July 2025 are not tax deductible. Before that date, GIC was deductible, which softened the real cost. Now the headline rate is the after-tax rate.
- A payment plan does not pause interest. GIC keeps accruing at the full rate on the outstanding balance for the life of the plan, compounding daily. The same rule change reshaped the deduction list generally; see our small business deductions guide.
The deductibility flip
Interest on a business loan used to pay a business tax debt is generally deductible in the normal way, because the borrowing relates to the business. That single difference reshapes the comparison.
A company owes the ATO $100,000. Option one: a 24-month ATO payment plan with GIC accruing at 11.43%, none of it deductible. Option two: a secured business loan at 9.5%, interest deductible at the 25% base rate entity company tax rate, giving an after-tax cost of about 7.1%. Over a two-year payoff the loan saves roughly $9,000 to $10,000 in after-tax interest, before counting the credit reporting and enforcement risks that sit with unresolved ATO balances. Exact figures depend on the amortisation profile; we model both paths side by side before recommending either.
Payment plan vs business loan
| Factor | ATO payment plan | Business loan |
|---|---|---|
| Interest rate | 11.43% GIC (Jul-Sep 2026), resets quarterly | Market rate; commonly 7-11% secured, 10-15%+ unsecured |
| Deductible | No (from 1 July 2025) | Generally yes for business tax debts |
| Compounding | Daily on the running balance | Amortised repayments, predictable schedule |
| Security required | No | Often, for the sharper rates |
| Default consequence | ATO enforcement escalates | Standard lender default processes |
| Credit reporting | Business debts over $100,000 unpaid 90+ days can be disclosed to credit bureaus | Loan reported normally from settlement |
When the payment plan still wins
A refinance is not automatic. The plan tends to win when:
- You can clear the debt fast. Under six months of interest at any rate is small money; the setup cost and effort of a loan may not pay back.
- Remission is realistic. The ATO can remit GIC where the delay arose from circumstances outside your control and you acted reasonably. A strong remission case can beat both options.
- You have no security and thin servicing. Unsecured pricing at the top of the band can land close to GIC, and a rejected application wastes weeks.
- Cash flow is lumpy. ATO plans can be renegotiated; a loan repayment schedule is a contract.
When refinancing wins
The loan usually wins when the debt will take 12 months or more to clear, the interest is deductible in your hands, and any of the ATO's escalation tools are in play. Those tools are real:
The ATO can disclose business tax debts to credit reporting bureaus once the debt exceeds $100,000 and has been outstanding more than 90 days without an arrangement. A disclosed default follows your file for years and reprices every future facility. Directors also face director penalty notice exposure for unpaid PAYG withholding, GST and super, which can make company debts personally payable, and unresolved balances raise your profile for the review activity covered in our ATO audit guide. Clearing the ATO with a commercial facility converts an escalating, compounding, non-deductible liability into a fixed, deductible, scheduled one.
How we run it at National Accounts
Our lending division sits inside the accounting firm, which changes the process: we already hold the financials, the ATO portal position and the BAS history, so serviceability is assessed on real numbers rather than a broker's reconstruction. We model the payment plan against two or three loan structures, including secured against property, and give you the after-tax comparison in one page. If the plan wins, we tell you that and set the plan up instead.
Frequently asked questions
Is ATO interest tax deductible?
Not any more. GIC and SIC incurred on or after 1 July 2025 cannot be claimed as a deduction. Interest incurred before that date remains deductible under the old rules.
Can I get a business loan if I have ATO debt?
Yes. Plenty of lenders write tax debt consolidation loans, though pricing varies widely with security and trading history. An existing payment plan with a clean payment record actually helps the application.
Does an ATO payment plan affect my credit file?
The plan itself is not reported. But business debts over $100,000 outstanding more than 90 days without an arrangement can be disclosed to credit bureaus, and that disclosure is severe. Getting an arrangement in place, or the debt refinanced, prevents it.
What rate should I expect on a tax debt loan?
Secured against property, commonly 7-11%. Unsecured, commonly 10-15% or higher depending on trading history. Both compare against GIC at 11.43% non-deductible.
How fast can it settle?
Straightforward secured deals commonly settle in two to four weeks. Unsecured can be faster. If enforcement action has started, tell us immediately; timing changes the strategy.
Clear the ATO the smart way
Send us your current ATO balance and we will model the payment plan against a refinance, after tax, in plain figures. Start a lending enquiry and we will come back within one business day.
Start a lending enquiryThis article provides general information only, current at the date of publication, and does not constitute personal tax, legal or financial advice. Consider your circumstances or speak with us before acting. Liability limited by a scheme approved under Professional Standards Legislation.
