Home loans for people with ATO tax debt
Yes, you can get a home loan with ATO tax debt. If you own property with enough equity, you can refinance and have the ATO paid out at settlement, replacing a non-deductible 11.51% interest charge that compounds daily with a home loan rate. If you’re buying, a number of lenders will approve you while you’re on a formal ATO payment plan.
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The cost of carrying a tax debt has gone up. Here’s what’s changed and why refinancing it into a home loan is worth a look.
The ATO’s general interest charge for Oct–Dec 2026. It compounds daily, so the effective rate is about 12.2%.
GIC incurred from 1 July 2025 can’t be claimed as a tax deduction, whatever year the debt relates to.
A business debt this size, overdue 90+ days and not being managed, can be reported to credit bureaus.
The usual maximum loan-to-value ratio most lenders allow when refinancing to clear tax debt.
Can I get a home loan if I owe the ATO?
Yes, in most cases. A tax debt isn’t an automatic decline. An unmanaged one is.
Lenders want to see three things: the debt is under control (a formal payment plan, or a plan to clear it at settlement), your income comfortably covers the new loan, and there’s a clear reason the debt happened that won’t repeat.
Most of the major banks are cautious about lending to clear tax debt. Specialist and non-bank lenders are usually where the options are, and a few banks will look at it case by case. Knowing which lender suits your scenario is most of the job, and it’s what we do every week for self-employed borrowers and business owners.
Refinance and consolidate
Refinance for a higher amount using your equity. The new lender pays the ATO directly at settlement, and the debt moves into your home loan, ideally in its own split so you can pay it down quickly. Moving house at the same time? A bridging loan can buy the next home before you sell, with the ATO cleared at settlement.
Typically needed: total lending at or below 80% of the property value once the debt is added. Some specialist lenders go higher.
Buy while on a payment plan
A number of lenders will approve a purchase with an active ATO payment plan, provided the plan is up to date, your lodgements are current and the instalments are included when they assess what you can afford. Buying your first home? See our guide to first home buyer loans for the grants and the 5% Deposit Scheme.
Typically needed: an ATO portal statement, current tax returns and BAS, and a clean repayment history on the plan.
What an $80,000 tax debt actually costs
At 11.51% compounding daily, an $80,000 ATO debt adds roughly $9,760 in interest in a year, and none of it is deductible.
| Option | Monthly repayment | Total interest | Deductible? |
|---|---|---|---|
| Leave it with the ATO for 12 months | — | $9,760 | No |
| ATO payment plan over 24 months | $3,750 | $9,990 | No |
| Home loan split cleared in 3 years | $2,450 | $8,270 | Depends on how the funds are used. Ask your accountant |
| Home loan split over 30 years | $506 | $102,000 | Depends on how the funds are used. Ask your accountant |
Figures are rounded and illustrative. GIC at 11.51% p.a. compounding daily (ATO, Oct–Dec 2026); the ATO resets the rate every quarter. The home loan rate of 6.5% p.a. is an example, not a quote. Specialist lenders may charge more, and refinance costs and lenders mortgage insurance aren’t included.
The real win is control, not just the rate.
Refinancing stops the daily compounding, eases your monthly cash flow and settles the ATO before things escalate to credit reporting, garnishee notices or legal action.
Stretched over 30 years, though, the same debt costs far more in total. So we set it up as a separate loan split you can clear quickly with extra repayments or an offset account. Offset vs redraw, explained.
Want your own numbers? Send us your ATO balance and property value and we’ll show you what refinancing would look like.
Get my numbersATO payment plan or refinance?
| ATO payment plan | Refinance into home loan | |
|---|---|---|
| Interest | GIC, 11.51% p.a. compounding daily (Oct–Dec 2026) | Your home loan rate |
| Tax deduction on interest | None since 1 July 2025 | Depends on how the funds are used |
| Typical term | Usually up to two years | Flexible; best kept short in its own split |
| Needs property equity | No | Yes |
| Setting it up | Online if you owe $200,000 or less; by phone above that | Through a lender, with a valuation and full application |
| Risk if you slip | Plan can default and the ATO can move to enforcement | Standard home loan obligations |
| Best for | Smaller debts you can clear quickly from cash flow | Larger debts where you have equity and want lower repayments |
Either way, you need all tax returns and BAS lodged. The ATO generally won’t agree to a payment plan while lodgements are outstanding, and lenders want them current too.
When it makes sense, and when it doesn’t
- You own property with usable equity.
- Your business is profitable now, and the debt came from a one-off such as a big growth year, a bad quarter or late lodgements.
- ATO instalments are squeezing your cash flow.
- You’ve had a notice of intent to disclose, or want to stay well clear of one.
- You want one repayment instead of juggling the ATO, cards and car loans.
- The business is still running at a loss, or new tax debt is still building.
- You expect to need to consolidate again next year.
- The ATO has started legal action, issued a garnishee notice or lodged a caveat. Some lenders will still help, but options narrow quickly.
- The debt sits in your company. Talk to your accountant about director penalty notices and how funds are lent to the company first.
From tax debt to one repayment
Get your lodgements up to date
Even if you can’t pay yet. Outstanding returns are the most common reason tax-debt applications stall, and lodging shows the ATO you’re engaging.
Free review with us
We look at the ATO balance, any payment plan, your property, income and goals, and tell you honestly whether refinancing makes sense.
We work with your accountant
With your permission, we confirm the figures and the right structure, especially if the debt sits in a company or trust.
Match and present
We shortlist lenders whose ATO debt policy fits, then package the application with the evidence and explanation a credit assessor needs.
Settle and clear
The new lender pays the ATO at settlement. You’re left with one repayment and a clean slate with the tax office.
What lenders will ask for
- An ATO portal statement showing the balance and any payment plan.
- All tax returns and BAS lodged.
- Recent financials or tax returns. Usually two years; some lenders accept one year, BAS or an accountant’s letter. Here’s how lenders assess self-employed income.
- A short explanation of how the debt arose and what’s changed.
- Property details for a valuation, plus statements for your existing loans.
Brokers who’ve been there
Melissa has worked in lending since 2006 and founded Thinking Big Finance in 2008. She’s an active property investor herself, so the team thinks about your loan the way an investor would: how to get approved now, and how to get the debt gone sooner.
Melissa Mann
Director & Senior BrokerIn lending since 2006, founded Thinking Big Finance in 2008, and an active property investor and developer herself. Credit Representative 522583.
Georgia
Mortgage & Finance BrokerSpecialises in self-employed clients, complex deals and investors. With Thinking Big since 2016. Credit Representative 508451.
“They went above and beyond where no other bank would budge on my situation. Truly can’t thank them enough.”
Helen · Thinking Big Finance client
“I have dealt with other brokers before but none with the attention to detail and the ability to get great rates like Mel and the team.”
James · Thinking Big Finance client
Tax debt and home loans, answered
Can I get a home loan with ATO debt?
Yes. Many lenders will approve a home loan when an ATO debt is being managed, either through a formal payment plan or by paying it out at settlement. What gets declined is an unmanaged debt with lodgements outstanding. Specialist and non-bank lenders are usually the most flexible, and a few banks will consider it case by case.
Can I refinance my mortgage to pay off my tax debt?
Yes, if you have enough equity. You refinance for a higher amount and the new lender pays the ATO directly at settlement. Most lenders want total lending at or below 80% of the property value, though some specialist lenders go higher. You still need to show your income can service the larger loan.
Do I need an ATO payment plan before I apply?
For a refinance that clears the debt at settlement, not always. For a purchase where the debt will remain, most lenders want an active payment plan with a clean repayment history, plus all returns and BAS lodged. If you owe $200,000 or less you may be able to set up a plan through ATO online services; above that you’ll need to phone the ATO.
Does ATO debt reduce how much I can borrow?
If the debt stays in place, yes. Lenders count your payment plan instalments as a commitment when they assess what you can afford. Clearing the debt at settlement removes that commitment, although the larger home loan has its own repayment.
Is ATO interest tax-deductible?
No. General interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025 aren’t deductible, even if the debt relates to earlier years. Whether interest on a home loan used to clear a tax debt is deductible depends on how the funds are used, so check with your accountant.
Will my tax debt show up on my credit file?
It can, for businesses. The ATO may report a business tax debt to credit reporting bureaus if you have an ABN, at least $100,000 is overdue by more than 90 days, and you’re not engaging with the ATO to manage it. The ATO sends a notice and gives you 28 days to act first, and the listing is removed once you pay in full or engage.
Can I get a low doc loan if I have ATO debt?
Sometimes. Some non-bank lenders will consider a low doc application with tax debt, verifying income through BAS, bank statements or an accountant’s declaration. Expect a lower maximum loan-to-value ratio and a higher rate than a full doc loan.
What if the ATO has lodged a caveat or started legal action?
It’s harder and the list of lenders is shorter, but it isn’t always the end of the road. Some specialist lenders will still refinance with an ATO caveat or legal action underway, provided the debt is cleared at settlement. The earlier you call, the more options you’ll have.
The tax debt is in my company. Can I still use my home to clear it?
Often, yes, but get the structure right first. Through director penalty notices, directors can be personally liable for a company’s unpaid PAYG withholding, GST and superannuation guarantee charge, so clearing those debts can be urgent. How the money is lent from you to the company affects tax and future borrowing, so we work alongside your accountant.
How long does it take?
It depends on the lender, the valuation and how quickly your paperwork is ready. Having your ATO portal statement, current lodgements and recent financials on hand speeds things up the most. We’ll give you a realistic timeline at your free review.
Do you only help people on the Sunshine Coast?
No. We’re based on the Sunshine Coast, but we help self-employed borrowers and business owners right across Australia by phone and video.
Question not here? Every tax debt is different. Ask us directly and we’ll give you a straight answer.
Ask a brokerThe terms, in plain English
- GIC
- General interest charge. What the ATO charges on unpaid tax, set quarterly and compounding daily. 11.51% p.a. for Oct–Dec 2026.
- SIC
- Shortfall interest charge. Applies when an amended assessment shows you underpaid; set four percentage points below GIC (7.51% p.a. for Oct–Dec 2026).
- Payment plan
- A formal arrangement to pay a tax debt by instalments. GIC still accrues on the balance while it runs.
- Director penalty notice
- A notice that makes company directors personally liable for unpaid PAYG withholding, GST and superannuation guarantee charge.
- LVR
- Loan-to-value ratio. Your total lending as a percentage of the property’s value. Most tax-debt refinances need 80% or less.
- Loan split
- Dividing one home loan into separate parts, so the tax debt portion can be tracked and paid off faster.
Let’s chat
Stop paying 11.51% to the ATO.
Tell us what you owe and what you own. We’ll tell you straight whether refinancing makes sense, and if it doesn’t, we’ll say that too.