Quick answer
A tax debt personal loan is finance used to pay money owed to the ATO, so the debt becomes a single loan with a set repayment pattern instead of an open balance that keeps growing. It may be unsecured or secured. Ownright Custom Finance looks at payment plans, personal loans and property-backed options for individuals Australia-wide.
Key points
- ATO interest on late tax keeps building until the debt is cleared
- A payment plan and a loan are different tools, and sometimes both make sense
- Secured options can open up when an unsecured loan is declined
- Your ATO account statement is the key document to line up first
- Suits
- Individuals and sole traders carrying a personal tax bill
- Security
- Unsecured, vehicle-backed or property-backed, depending on the case
- Documents
- ATO account statement, notice of assessment, ID, income evidence
- Australia-wide
- Yes
What is a tax debt personal loan?
A tax debt personal loan is a loan taken out to pay a bill owed to the Australian Taxation Office. The lender pays the ATO, and from then on you deal with one lender and one repayment schedule. That can be a relief when a tax debt has been sitting there, growing in the background, and starting to dominate your thinking.
The loan might be unsecured, meaning nothing is pledged, or secured against something you own such as a car or a property. Which one is realistic depends on your income, your credit file and what else you owe. If you are a business owner with BAS or GST arrears, our page on BAS and GST debt loans covers the business side. This page is for individuals and sole traders dealing with a personal tax bill.
Why does tax debt feel urgent?
The ATO charges general interest charge on overdue amounts, and the ATO says it compounds daily. That means time works against you, even if the original bill was modest. Under the changes the ATO has flagged, interest charged on or after 1 July 2025 is also no longer tax deductible, so the cost of carrying the debt is not softened at tax time the way it once was.
None of that means panic. It means the debt deserves a plan, and a plan can take several shapes.
Payment plan or loan: how do they compare?
| Feature | ATO payment plan | Personal loan to clear the debt |
|---|---|---|
| Who you owe | The ATO | A lender |
| Recovery action | The ATO says debts under a plan are not subject to recovery action | Handled by the lender’s terms |
| Interest | The ATO states interest keeps accruing | Set by the loan contract |
| Credit file | Not a standard credit enquiry | A new credit application is recorded |
| Flexibility | Plan terms agreed with the ATO | Term and structure depend on the lender |
| Best when | The balance is manageable from cash flow | You want one clean repayment or a different term |
According to the ATO, payment plans can be managed online for some people who owe a set threshold or less, and otherwise by phone. Many borrowers use a plan as a bridge while a loan is arranged, or a loan to retire a plan that no longer fits. If you want a hand with the decision, a personal loan is one tool, and there are others.
Who might a tax debt loan suit?
- Employees with a large tax bill after a year of side income, share sales or a missed adjustment
- Sole traders whose personal and business affairs overlap
- People who have fallen behind on lodging and are catching up
- Borrowers whose payment plan has become tight and who want a different term
- Anyone who wants a single repayment instead of juggling the ATO plus other debts
What do lenders look at?
The debt itself. A current ATO account statement shows what is owed, what has been lodged and whether any plan is in place.
Your income and living costs. Lenders test whether you can afford the new repayment after your expenses. Our guide to loan serviceability explains the maths in plain English.
Credit history. Defaults, late payments and recent enquiries all matter. A look at your credit report before you apply avoids surprises.
Security. Offering a car or property can widen the field. The trade-off is that the asset is on the line, which is why we talk it through before anything is signed. Our guide to secured and unsecured personal loans sets the two side by side.
What if an unsecured loan is declined?
It happens, particularly when the debt is large relative to income. Property owners sometimes look at a second mortgage for tax debt, which uses equity as the backing and can suit bigger balances. Others consolidate the tax bill together with cards and personal loans through debt consolidation. If money is genuinely tight, financial hardship refinance looks at restructuring everything, not just the tax bill.
Each of these has costs and risks, and what is right for one household is wrong for another. We lay out the pros and cons for your situation rather than pushing one product.
How Ownright approaches tax debt
Trevor Scott has spent more than 40 years in finance, and a tax debt is rarely a surprise to him. The people who come to us are usually sensible, hard-working and a little embarrassed, and they should not be. We start by listening to what happened, then work out what a lender needs to see.
Because we work Australia-wide from our Knoxfield, Victoria head office, we can look at the full range, including options that many brokers never mention. Our line is that if Ownright cannot find the solution, no one can, but we never promise approval. What we promise is a straight look at your choices.
An illustrative example
Picture a sole trader with a personal tax bill after a strong year of contract income and no money set aside. Their payment plan is in place, but the balance is large and the repayments crowd out everything else. We would review the ATO statement, income and other debts, then compare keeping the plan with an unsecured loan or a loan backed by a vehicle. The best answer is the one the budget can actually carry. This is an illustrative scenario only.
Mistakes to avoid
- Ignoring ATO letters because opening them feels stressful
- Applying to many lenders at once, which leaves several enquiries on your file (see our guide on why mass applications hurt)
- Borrowing more than the tax bill without a reason
- Taking a loan with repayments the budget cannot hold for the full term
- Skipping advice from an accountant about the tax side
What should I have ready?
- Recent ATO account statement and your latest notice of assessment
- Photo ID and proof of address
- Payslips or bank statements, or tax returns if you are self-employed
- A list of other debts, with balances and repayments
- A brief note on why the debt arose
Our checklist on how to get loan ready and our guide to what documents you need cover the rest. If you want a dedicated look at what is available, you can start an application and talk it through with us.
Ready to put the ATO debt behind you?
Sounds like you’re looking for a loan to clear a tax debt. We’re the lending experts in tax debt finance for individuals, and our team works through the options with you. Click the button below and see if you qualify.
How it works, step by step
- 1
Step 1
Send us your ATO balance and what it relates to, plus a snapshot of your income and other debts.
- 2
Step 2
We weigh up a payment plan, an unsecured loan and a secured option side by side.
- 3
Step 3
We approach lenders comfortable with tax debt and your profile, and talk through the structure.
- 4
Step 4
Once approved and signed, the lender pays the ATO and you repay one loan.
Frequently asked questions
Can I get a personal loan to pay my ATO debt?
Often, yes, although it depends on your income, credit history and any security you can offer. Some lenders are cautious about loans used for tax debts, while others consider them routinely. Tell us the amount, what it relates to and your repayment capacity, and we will look at which structure suits.
Is a payment plan better than a loan?
It depends on the debt and your finances. A payment plan keeps the debt with the ATO, while a loan moves it to a lender with its own fees and terms. Neither is automatically better. We compare both against your cash flow so you can see the difference in plain numbers.
Does interest on ATO debt stop under a payment plan?
No. The ATO states that debts under a payment plan are not subject to recovery action, but interest keeps accruing while you pay the balance down. That is one reason people look at refinancing the debt. Check your own account with the ATO for the details that apply to you.
Can I borrow to pay a tax debt with bad credit?
Sometimes. Lenders that focus on the whole picture may look past a blemished file, particularly when there is security such as a vehicle or property. Expect different terms and possibly a deposit or extra paperwork. We ask how the credit issue arose and approach suitable lenders.
What documents do I need?
Usually an ATO account statement showing the balance, your latest notice of assessment, photo ID, recent payslips or bank statements, and a list of your other debts. Self-employed borrowers may be asked for more. Our guide to the ATO account statement explains where to find it.
Is the interest the ATO charges tax deductible?
From 1 July 2025, general interest charge on late tax is no longer deductible, according to the ATO, and that applies to charge incurred on or after that date. Your accountant can confirm what applies to you. We keep tax advice with tax professionals.