Talking to the ATO before you borrow

Why talk before you borrow?

When the ATO is pressing, the instinct is often to find the full amount as fast as possible and pay it. Sometimes that’s exactly right. But borrowing without first talking to the ATO can lead to three expensive mistakes:

1. Borrowing too little because the figure didn’t include interest or another account.
2. Borrowing too much when a smaller lump sum plus a payment plan would have resolved the enforcement action.
3. Paying the wrong thing — clearing the income tax account while the garnishee relates to GST, or paying the debt without the outstanding lodgements that the ATO also wants.

A short, well-prepared conversation with the ATO avoids all three. It typically takes less time than the loan application, and it can make the loan smaller, cheaper and more effective.

Before you call: prepare

Item	Why
Integrated client account statement	Exact balance by account and period
Lodgement status	Outstanding BAS or returns undermine any offer
Any notices — garnishee, DPN, warning letters	Know what action is already underway
Cash available now	What you can pay today without borrowing
Funding possibilities	Rough idea of what you could borrow and how fast
Your accountant or tax agent	Ideally on the call or briefed beforehand

If lodgements are outstanding, ask your accountant to lodge them as a priority. An offer from a business that’s behind on lodgements is much weaker than the same offer from one that’s up to date.

What to ask the ATO

Use these questions as a script, adapting to your situation:

1. “Can you confirm the total balance, including general interest charge to today?”
2. “Which accounts and periods does any garnishee notice or director penalty notice cover?”
3. “What payment would lead you to withdraw or vary the garnishee notice?”
4. “If I pay a lump sum of $X by [date], would you consider a payment plan for the balance? Over what term?”
5. “Are any lodgements outstanding from your side?”
6. “Is there anything else you’d need from me?”
7. “Can you note on my file that funds are being arranged and will be paid by [date]?”

Write down the name of the officer, the date and time, and what was said. Follow up in writing where you can — through ATO online services or your tax agent.

Understanding the possible outcomes

Situation	Possible outcome of a payment	Loan sizing
Garnishee notice	Full payment usually ends the reason for the notice; part payment plus plan may lead to a variation	Full debt, or the lump sum the ATO indicates
Director penalty notice	Paying the company debt remits the penalty	Full amount covered by the notice
Defaulted payment plan	Arrears paid, plan reinstated or renegotiated	Arrears plus buffer
Rising debt, warning letters	Lump sum plus plan to avoid enforcement	Lump sum the ATO would accept

The right loan size follows directly from the outcome you agree. That’s why the conversation comes first.

Lump sum plus plan: often the sweet spot

For many businesses, the most cost-effective structure is a funded lump sum and an ATO payment plan for the remainder:

• The lump sum shows good faith and reduces the ATO’s exposure, which can make a plan more acceptable.
• The plan spreads the balance over time without a second loan.
• The loan is smaller, so its total cost is lower.

Remember that general interest charge keeps running on the plan balance, and from 1 July 2025 it’s no longer deductible. For some businesses, clearing the debt entirely with a loan works out better. Ask your accountant to compare the two in dollars.

What not to do

• Don’t promise what you can’t deliver. A missed promise makes the next conversation harder.
• Don’t ignore lodgements. Lodging on time matters even when you can’t pay.
• Don’t keep using GST and withheld PAYG as working capital. That’s how the debt grew.
• Don’t wait for the ATO to call you. Engage first.

Illustrative example: a smaller loan than expected

Illustrative only. A Perth hospitality group has an ATO debt it believes is about $290,000, with a garnishee notice on its bank account. The owner plans to borrow the full amount. Before applying, she and her accountant call the ATO. They confirm the balance is $297,400, but learn that two outstanding BAS lodgements would reduce it once processed, and that a lump sum of $150,000 plus a 12-month plan could lead the ATO to withdraw the garnishee.

Her accountant lodges the outstanding BAS that week. The owner arranges a $160,000 caveat loan over her investment property — about half what she originally planned — pays the lump sum directly to the ATO, and the garnishee is withdrawn. The plan covers the rest.

After the call: funding

Once you know the outcome and the amount, funding can be lined up quickly. For larger debts, property-secured loans are often fastest: $20k to $250k is possible the same day, and up to $5m within 24–48 hours. Without property, unsecured loans are typically $5,000 to $500,000, sized on statements — though a garnishee can make them harder. See using a business loan to pay the ATO for the options in detail, and the pages on garnishee notices and director penalty notices for the specific emergencies.

Talking to the ATO when a director penalty notice is involved

A director penalty notice changes the tone of the conversation, because the clock is short and the consequences are personal. Before calling, check with your accountant whether the relevant activity statements and super statements were lodged within three months of their due dates — that affects which options can remit the penalty. Then ask the ATO to confirm exactly which amounts the notice covers and that payment of those amounts within the period will remit it. Get the answer in writing where you can, and pay well before day 21.

Keeping a record of every ATO contact

Keep a simple log: date, time, the officer’s name or reference, what was asked and what was agreed. Save copies of letters and online messages in one folder. If anything is later disputed — a payment misallocated, a promise misunderstood — that record is invaluable, and it’s also useful for any lender who wants to see that the ATO has agreed to the plan your loan supports.

Fund the outcome you agreed

When you know what the ATO needs, start your 60-second enquiry and tell us the agreed amount and date.

There’s no credit check when you first enquire. We don’t send your details out to a long list of lenders — one specialist builds the right structure and calls you back. Please be accurate about the ATO balance, lodgement status and any property; matching the loan to the agreed outcome is how you avoid borrowing too much or too little. See if you qualify.