Facing an ATO tax debt? Your finance options before enforcement
An ATO tax debt does not sit still. From 1 July 2025 the interest the ATO charges is no longer tax deductible, it runs at around 11.17% and compounds daily, and the collection tools escalate faster than most business owners expect. By the time a director penalty notice or a garnishee lands, the options have narrowed. This is what actually happens when the ATO chases a debt, and the private finance that can clear it before enforcement bites. Aurelius Private are private lending brokers; we place these deals with a lender from our panel, we do not lend our own money.
What ATO enforcement actually looks like
The ATO was carrying $54.2 billion in collectable debt at the last count, and small business owed $35.9 billion of it across more than 1.3 million businesses.[1] After going quiet through COVID, the ATO has hardened right back up: director penalty notices are up 136% in a year, and it picked up a $999 million funding boost to put more than 1,000 extra people on debt and audit work.[2] The escalation tends to run in a set order, and each step is harder to walk back than the last.
It usually starts quietly, with reminder letters and the general interest charge ticking over daily. Ignore that and the ATO moves to a director penalty notice. A DPN makes you personally liable for the company's unpaid PAYG withholding, GST and super guarantee charge, and there are two kinds. A non-lockdown notice gives you 21 days to pay, appoint a voluntary administrator, appoint a small business restructuring practitioner, or begin winding the company up. A lockdown notice, issued when the returns were never lodged on time, makes you liable with no escape except paying. The 21 days runs from the date on the notice, posted to your address on the ASIC record, so plenty of directors lose a week before they even open it.
If a debt still is not dealt with, a garnishee notice skips you entirely. The ATO directs your bank, or your customers and debtors, to pay money owed to you straight to the ATO instead. It can hit a bank account within weeks, and the first you hear of it is often a payment that bounces. For a company, the ATO can also issue a statutory demand and, if it is not paid or set aside within 21 days, apply to wind the company up. Wind-up applications have stayed historically high, and June 2026 was the worst month for insolvencies so far this year.[2] On top of all that, the ATO can report a business tax debt to the credit bureaus once it is over $100,000 and more than 90 days overdue, which quietly shuts the door on borrowing from anyone while it sits there.
Carrying the debt is now a losing trade
There used to be a small consolation in an ATO debt: the interest was at least deductible. Not any more. General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible,[3] so every month you hold the debt costs more in real terms than it used to, on top of daily compounding at around 11.17%. The ATO has quietly become the most expensive lender on your books, and the least flexible. Doing nothing is now an actively expensive strategy.
The finance that clears it
Where there is equity in a property, private finance can pay the ATO out in days and buy you room to trade. Four structures tend to fit, and which one depends on how much you need, how fast, and how you plan to repay.
A caveat loan is the fastest tool we have. It is secured by a caveat over your property rather than a registered mortgage, needs no consent from your first lender, and can settle in 24 to 72 hours. It suits a debt with a deadline measured in days, a DPN window closing or a garnishee already threatened. Terms are short and the rate reflects the speed, so it is a bridge to a cleaner exit, not a long-term loan.
A second mortgage sits behind your existing first loan and releases the equity without refinancing it, which is useful when your first mortgage is on a good rate you do not want to disturb. It handles larger sums than a caveat and gives you a bit more runway. A first mortgage refinance is the move where the debt is large and there is room in the property to fold the ATO liability into a single new facility. And where the business itself has the cash flow to service it, working capital finance can clear the debt without touching your property at all.
What about a payment plan or restructuring?
The ATO still offers payment arrangements, and for a manageable debt with steady cash flow that can be the right answer. They have become shorter and the ATO wants more up front, but they avoid new borrowing. Small business restructuring is the other formal option, and appointing a restructuring practitioner is one of the ways to satisfy a non-lockdown DPN. Private finance is not a replacement for either. It is the faster path when a deadline is live, when a payment plan has already defaulted, or when you need the debt gone cleanly so you can borrow or settle a deal without it hanging over the file. Often it buys the breathing room to then negotiate properly.
What a lender needs to see
Three things decide whether this works: equity in a property, a clear exit such as a sale, a refinance or incoming receivables, and whether your lodgements are up to date. You do not need a clean credit file. A private lender is pricing the security and the way they get repaid, not your history with the ATO. If your returns are lodged, even where you cannot pay them, you have more options, because that keeps a DPN in non-lockdown territory.
Move before the clock does
The single most common mistake is waiting for the notice before picking up the phone. A caveat loan can settle in a day or two, but only if the file is in front of a lender before the deadline, not after. If you are inside a 21-day DPN window, if a garnishee has already hit, or if you can see a wind-up coming, that is the moment to act. For the bigger picture on why the ATO has become so aggressive, read our piece on the ATO crackdowns in 2026.
If you are staring at an ATO deadline, send us the scenario. We will tell you the same day whether we can place it and how fast.
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