A June 2026 report from the Australian National Audit Office put Australia's collectable ATO debt at $54.2 billion. Small business accounted for $35.9 billion of that figure — close to two-thirds of the total. Corporate insolvencies remain elevated, with 14,153 first-time external administration or controller appointments recorded in 2025–26.
Source: Australian National Audit Office, June 2026.
The ATO has also made payment performance and debt collection a stated priority, and carrying tax debt now costs more than it used to. Since 1 July 2025, general interest charge (GIC) and shortfall interest charge (SIC) are no longer tax deductible, while interest continues to accrue under a payment plan. For a business already under cash flow pressure, that change compounds the problem quietly, in the background, every quarter.
Tax debt is usually a symptom, not the problem
It's tempting to treat an ATO debt as the issue to be solved — refinance it, consolidate it, make it go away. But in most cases we see, the debt is a symptom of something else: a margin squeeze, a slow-paying client base, a project that ran longer than the working capital allowed for, or simply growth that outpaced the business's cash conversion cycle.
Refinancing can create time. But time only has value if there is a credible plan for what happens in it.
Replacing one liability with another isn't a strategy. The structure needs to improve the underlying position — not simply postpone the problem to a later, and possibly worse, date.
The questions worth answering before refinancing
Before any lender — us included — can sensibly assess a scenario involving ATO arrears, the underlying business case needs to hold up to a small number of direct questions:
- Is the business viable? Not "was it viable before the arrears," but is it viable now, on its current trading position.
- What caused the arrears? A one-off event (a delayed settlement, a lost contract) reads very differently to a structural, ongoing cash flow gap.
- Will the new structure actually improve cash flow? Or does it just move the due date without changing the monthly obligation the business has to meet.
- Can ongoing obligations still be met? Including the new facility, trade creditors, payroll and any BAS or PAYG commitments going forward.
- What is the exit? Sale of an asset, refinance to a mainstream lender once trading normalises, or repayment from a specific, identifiable event.
Where property-backed finance fits
Where a viable business has property equity and a credible strategy behind it, property-backed finance may help consolidate ATO arrears and restructure the position — buying the business time to execute on a plan that's already been thought through, rather than time to keep doing what got it into arrears in the first place.
That's the distinction that matters to us as a lender, and it's the distinction an adviser should be comfortable articulating before a scenario is sent through: not "can we refinance this debt," but "does this business have a credible way forward, and does property-backed finance give it room to execute that plan."
Have a client with ATO arrears backed by property?
Speak with their advisers early to confirm the underlying plan — then send us the scenario for an initial assessment.
Submit the Scenario →This article is general in nature and does not constitute financial, credit, tax or legal advice. It does not take into account your objectives, financial situation or needs, or those of any client. Figures cited are drawn from the Australian National Audit Office's June 2026 report and were current at the time of publication; please verify current data independently. Any funding is provided for business or investment purposes only, is not regulated credit, and remains subject to Funding Door's credit assessment and approval. Please seek independent professional advice before acting.