Refinancing ATO debt against your property

Can you refinance an ATO debt with a property loan?

Yes. A loan secured against your property can pay out a tax balance in one go. Once the payout lands, your account with the ATO is up to date and the new lender holds the debt, backed by a registered mortgage.

This is not a magic eraser. You swap one obligation for another, and the swap only helps if the new arrangement is easier to carry than the old. For some owners it is. For others, a payment plan with the ATO is the better first move. The point of a proper review is to find out which camp you are in.

What changed for ATO interest?

The ATO has confirmed that, from 1 July 2025, interest it charges on late payments and underpayments is no longer tax deductible. That applies to general interest charge accruing from that date, even where the underlying debt is older. The ATO also notes that interest keeps accruing under a payment plan, although it reduces as payments reduce the balance.

For some borrowers, that makes a tax debt more expensive in after-tax terms than it used to be, and it prompts a fresh look at alternatives. This is general information only, and your accountant is the right person to tell you how it applies to your return.

ATO payment plan or property-backed loan?

Question	Payment plan with the ATO	Property-backed payout
Who do you owe afterwards?	The ATO	A private or specialist lender
Is security required?	Not necessarily	Yes, a mortgage over property
Does interest keep accruing?	Yes, reducing as the balance falls	Under the new loan’s terms
Can recovery action stop?	Generally, while the plan is honoured	Yes, once the debt is paid out
Best when	You can meet the schedule comfortably	You want closure or cannot meet the plan

Neither is right for everyone. We are happy to talk through both, including the option of starting with a plan while a payout is arranged.

Who does ATO debt refinancing suit?

• Owners with equity who need to close a tax balance before it grows or escalates.
• Business owners with BAS, PAYG or superannuation debts and a plan to stabilise.
• Individuals with income tax debts after an assessment or amendment.
• People whose payment plan has become unmanageable or has defaulted.
• Borrowers who have been declined by a bank because of the debt.

If the real issue is that the business is not viable, finance alone will not fix it, and we will say so. If the issue is a timing problem, a lump sum or a bad year, the answer is often a clean payout and a plan.

What do lenders look at?

• Security: the property, its location, its title and the equity.
• The debt: the amount, the type and whether recovery action has begun.
• The cause: a one-off hit is viewed more favourably than an ongoing pattern.
• The plan: how the new loan will be repaid or refinanced.
• Current compliance: whether lodgements are up to date.

Lodgements matter. An overdue return can slow a file, so catching up on paperwork alongside the payout is often part of the plan.

How Ownright handles ATO debt refinance

Tax debt is one of the most common reasons good borrowers are declined by banks, and one of the situations where our experience helps most. Trevor Scott has watched this scenario play out for decades and knows which lenders treat it sensibly.

We start by reading the ATO position clearly, with you or your accountant. Then we look at two questions: what is the cheapest sensible way to close this, and what happens afterwards? We do not want you back in the same position in twelve months. If a structure from outside the usual playbook fits, we will find it, because Ownright is built around solutions.

For a broader view of the options, our guide on ATO debt and your property walks through each path. When you are ready, send us your details and we will look at it promptly.

An illustrative example

Illustrative only. A trades business owner has an outstanding BAS balance after a slow year and has been declined for a bank top-up because of the arrears. They own their home with comfortable equity and have lodged all outstanding returns.

A second mortgage from a private lender pays out the ATO in full, stopping further interest and recovery steps. Repayment or interest handling is structured to suit their cash flow, and the plan is to refinance to a mainstream lender after a period of clean lodgements.

Mistakes to avoid

• Ignoring ATO letters until they escalate to a firm notice.
• Falling behind on current obligations while paying off old ones.
• Choosing a payout without considering whether a payment plan would be easier.
• Leaving lodgements outstanding, which can derail an application.
• Borrowing more than is needed, which raises the cost and the risk.

Documents to have ready

• Recent ATO statements or an online services account snapshot.
• Any payment plan agreement or ATO notices.
• Identification for each borrower.
• Title details or a rates notice for the property.
• A short explanation of how the debt arose and what has changed.

Related pages

If the debt sits in a company, see business loans to clear ATO debt. Homeowners seeking a standard mortgage may prefer home loans when you owe the ATO. For multiple debts, secured debt consolidation may fit better, and second mortgages explain the structure often used.

What does the ATO expect while you sort this out?

Talking to the ATO early tends to produce better outcomes than silence. The ATO’s own guidance notes that a debt actively managed under an agreed plan avoids debt recovery action, and that payment plans can be arranged through ATO online services or with a registered tax professional. If you are working on a refinance in parallel, tell your tax agent, because they can often request time while a payout is arranged.

We do not speak to the ATO on your behalf in a legal or advisory sense, but we can plan the payout around the dates and amounts you provide. We also suggest you keep every lodgement current. Falling behind on new obligations while paying off old ones is one of the most common reasons a clean-up fails.

How is the payout handled?

The payout itself is mechanical. The lender obtains a current statement of the balance, and at settlement the funds are paid directly to the ATO against your account. Because interest accrues daily, the figure on the day of settlement will differ from the figure a week earlier, so lenders usually allow a small buffer and any surplus is dealt with in the settlement statement.

Afterwards, it is worth checking your ATO online account to confirm the debt has cleared and to see that no outstanding lodgements remain. We encourage borrowers to do this as a final step.

What if the debt sits in a company or trust?

Tax debts can sit with an individual, a company or a trust, and that affects the structure. If directors have personal exposure, or personal property is already supporting business facilities, a lender will want to understand the whole chain. We usually ask for a short summary of the entities involved, who owes what and who holds the property. It sounds like paperwork, but a clear picture here prevents delays near settlement.

Should you tell your accountant?

Yes. Your accountant knows the history of the debt and can tell you whether the numbers are right, whether any amendments are pending and how the change in interest deductibility affects your return. They can also help ensure that lodgements are in order. In our experience the best results come when the broker, the accountant and the borrower are all working from the same figures.

Let’s look at your ATO position

You do not need to have everything perfect before you call. Start with the apply page or ring 03 7043 7233, and we will take it from there.