The business owner says:
“We owe the ATO about $320,000 and I need $450,000 in business finance.”
Okay.
Then comes the next piece of information.
Two BAS lodgements are outstanding.
The latest company tax return isn’t finalised.
Suddenly:
$320,000
isn’t necessarily the number we should be building the finance strategy around.
The business may owe $320,000 today based on what has already been assessed.
But if required lodgements remain outstanding, additional liabilities may still need to be established.
So before asking:
“Can I get finance with $320,000 of ATO debt?”
we may need to answer another question:
“What is the business’s actual tax position?”
That distinction matters.
The Mawson Lakes Business
Consider an established engineering and manufacturing business operating around Mawson Lakes and servicing commercial customers across South Australia.
Trading history:
12 years.
Annual turnover:
approximately $6.4 million.
Employees:
26.
Current known ATO debt:
approximately $320,000.
Business finance required:
$450,000.
The owner wants the money for:
working capital,
new equipment,
and potentially reducing some of the ATO balance.
On the surface, this looks like a substantial but understandable commercial finance enquiry.
Then we look deeper.
Two BAS Lodgements Are Outstanding
The owner says:
“The accountant is working on them.”
Fine.
But what will those BAS lodgements do to the tax position?
Maybe:
very little.
Maybe:
a lot.
Until the figures are prepared, we don’t know.
The $320,000 Could Be an Incomplete Number
Imagine the two outstanding BAS periods ultimately add:
$95,000
to the amount payable.
Now the business doesn’t effectively have a:
$320,000
tax issue.
It has something closer to:
$415,000
before allowing for any other changes to the account.
That materially changes the finance discussion.
Now Add the Outstanding Company Tax Return
Perhaps the latest company tax return results in another amount payable.
Now the total position could move again.
That’s why I don’t want to tell a lender:
“The client’s ATO debt is $320,000.”
when we already know material lodgements are outstanding.
Start With the Truth, Even if the Number Isn’t Pretty
If the real tax position becomes:
$430,000
I’d rather know that before approaching finance.
A known:
$430,000
problem
is easier to analyse than an:
“approximately $320,000 but we’re not sure”
problem.
Why Do Lodgements Fall Behind?
There are plenty of reasons.
Sometimes:
records are incomplete.
Sometimes:
the accountant is waiting for information.
Sometimes:
the business has changed accountants.
Sometimes:
bookkeeping has fallen behind.
Sometimes:
the owner knows the lodgement will create a liability and delays dealing with it.
Those situations aren’t identical.
The Reason Matters
Imagine Business A.
It changed accounting firms after its previous accountant retired.
Records had to be transferred and reconstructed.
Two BAS periods became overdue during the transition.
The business otherwise maintains good records.
Now consider Business B.
It hasn’t lodged properly for:
18 months.
The owner doesn’t know:
true profitability,
current tax liabilities,
or even whether the bookkeeping is accurate.
Those are very different finance situations.
“My Accountant Is Fixing It” Needs a Timeline
That’s good.
When?
What information is missing?
Are the accounts reconciled?
How many periods are outstanding?
Can the accountant estimate the likely additional liability?
We need enough information to understand whether we’re dealing with:
a short administrative delay
or
a much larger financial problem.
What If the Business Needs Finance Urgently?
This is where owners can become frustrated.
The machine is available now.
The supplier wants a deposit.
The contract starts in three weeks.
The owner says:
“Can’t we just get the finance approved and sort the BAS later?”
Maybe the finance pathway has particular documentation requirements.
Maybe the outstanding position affects what a lender is prepared to consider.
Lender requirements vary.
But we shouldn’t pretend the outstanding tax information doesn’t exist.
The Finance Amount May Also Be Wrong
The business initially asks for:
$450,000.
Why?
The owner explains:
$180,000 for equipment
$150,000 for working capital
$120,000 towards ATO debt.
Total:
$450,000.
But if the true ATO position increases by:
$100,000,
does the funding strategy change?
Maybe.
Don’t Build a $450,000 Solution to a $550,000 Problem
This is the danger.
The business settles:
$450,000
of finance.
Equipment is purchased.
Some working capital is restored.
Part of the ATO debt is paid.
Then the outstanding lodgements are completed.
Another:
$100,000
becomes payable.
The business suddenly needs more money.
That’s exactly what we want to avoid.
Work Out the Full Requirement First
The eventual strategy might still involve:
$450,000.
Or:
$350,000.
Or:
$500,000.
Or no finance at all.
But the amount should come from the actual business position.
Not:
“That’s roughly what I think we’ll need.”
What If the BAS Lodgements Reduce the Debt?
Possible circumstances can be more complicated than simply adding liabilities.
The point isn’t to assume every outstanding lodgement increases the amount.
The point is:
we don’t know until the tax position is established.
That’s why the accountant or tax adviser is important.
A Finance Broker Doesn’t Prepare Your BAS
Thrive Broking’s role is finance.
We’re not replacing:
your accountant,
tax agent,
lawyer,
or restructuring adviser.
If tax lodgements are outstanding, appropriate tax professionals need to address that part of the problem.
Then we can work with the resulting information when investigating finance.
What Does the Lender Actually Need?
That depends on:
lender,
product,
amount,
security,
business circumstances,
and transaction.
Some applications require substantial financial information.
Others may have different documentation pathways.
But don’t interpret:
“low doc”
as:
“tax position doesn’t matter.”
Low Doc Doesn’t Turn an Unknown Liability Into a Known One
Even if a particular lender doesn’t require every historical financial statement, the business itself still needs to understand what it owes.
Why?
Because the owner needs to know whether the proposed finance actually solves the problem.
Suppose the Business Owes $500,000 Once Everything Is Lodged
Now we can work with:
$500,000.
Annual turnover:
$6.4 million.
Trading history:
12 years.
Employees:
26.
Established customer base.
Now ask:
How did the $500,000 arise?
Can the business service a finance facility?
Are current obligations now being managed?
What existing debt is there?
What security may be available?
That’s a real assessment.
Compare That With $500,000 and Still No Current Records
Same debt.
Different confidence.
If management cannot tell us:
current profit,
current cashflow,
customer debtors,
existing liabilities,
or current tax position,
there may be a broader financial-management problem.
What If the Business Is Highly Profitable?
Suppose after the accounts are brought up to date we discover:
Annual turnover:
$6.4 million
Operating profit:
approximately $780,000
Known ATO debt after lodgements:
$410,000.
Now we have a viable commercial business with a substantial historical liability.
That may be worth investigating.
What If the Updated Accounts Show a Loss?
Suppose instead:
Annual turnover:
$6.4 million
Operating loss:
$420,000.
Now the ATO debt is only part of the problem.
Why is the business losing:
$420,000?
Will finance change that?
If not, clearing the ATO could simply move the debt while losses continue.
This Is Why Getting the Accounts Current Can Help the Owner Too
It’s not just about satisfying a lender.
Current information helps the owner understand:
what the business earns,
where cash goes,
what is owed,
what customers owe,
and whether the business is actually improving.
You can’t make good finance decisions from numbers that are twelve or eighteen months out of date.
What If Only One BAS Is Overdue?
Again:
context.
One recently overdue BAS because the accountant is finalising a reconciliation is different from:
six outstanding BAS periods
plus
multiple overdue tax returns.
Don’t turn every late lodgement into the same story.
What If the Business Hasn’t Lodged for Two Years?
That is much more serious.
Imagine the ATO account currently shows:
$180,000
owing.
The owner thinks:
“It’s not too bad.”
But:
eight BAS periods
and
two annual returns
remain outstanding.
Is the real liability:
$180,000?
$300,000?
$500,000?
More?
We don’t know.
Don’t Borrow Against an Unknown Problem
Before arranging:
$500,000
of business finance,
the owner should understand what the money actually needs to achieve.
Otherwise the business could take on substantial new debt and still emerge with unresolved ATO liabilities.
What If the Owner Delayed Lodging Because They Couldn’t Pay?
This happens.
The owner thinks:
“If I lodge it, I’ll owe the money.”
But delaying the information doesn’t solve the underlying obligation.
From a finance perspective, it also makes the business position harder to assess.
Get appropriate tax advice and establish the real position.
What If the Business Is Already on an ATO Payment Plan?
Now we have:
known historical debt,
a payment arrangement,
and
outstanding lodgements.
The existing payment plan doesn’t necessarily tell us what the future total balance will be once the outstanding obligations are processed.
That’s another reason to establish the current position.
What If New Liabilities Change the Payment Arrangement?
That’s something the business should discuss with the ATO and its tax adviser.
Don’t assume an existing arrangement automatically deals with amounts that have not yet been properly quantified.
For finance purposes, we need to understand what the business will actually be required to manage.
What If the Business Has Defaulted on a Payment Plan as Well?
Then we now have several issues:
ATO debt,
outstanding lodgements,
and
a failed arrangement.
That doesn’t mean:
“Don’t bother.”
But it means we need a much more complete picture before deciding whether finance is appropriate.
What About Equipment Finance?
The Mawson Lakes business wants:
$180,000
of the proposed funding for equipment.
The equipment itself may be a perfectly sensible purchase.
But should the business add:
$180,000
of asset debt
before understanding whether its ATO liability is:
$320,000
or
$500,000?
That’s the commercial question.
Maybe the Equipment Can’t Wait
Suppose an existing machine has failed.
Replacement cost:
$180,000.
Without it, the business loses:
$70,000 per month
of production.
Now delaying the purchase could be extremely expensive.
That may justify investigating the equipment transaction separately while the tax position is being resolved.
Again:
the facts determine the approach.
What If the Equipment Is Optional?
Different answer.
The owner wants a second machine because:
“It would be good to have.”
No signed work.
No immediate productivity problem.
ATO position uncertain.
Maybe now isn’t the time.
What About Working Capital?
The business wants:
$150,000
for working capital.
Why?
Customer invoices outstanding:
$1.05 million.
Average customer payment:
47 days.
That gives us a genuine working-capital issue to investigate.
But if the $150,000 is simply needed because the business loses money every month, that’s different.
ATO Debt and Debtor Problems Often Sit Together
The business may have:
$1 million+
in invoices waiting to be paid
while
hundreds of thousands are owed to the ATO.
That doesn’t automatically mean debtor finance is the solution.
But it tells us the tax problem may be connected to the cash-conversion cycle.
The Tax Debt May Be the Symptom
Slow customers.
Growth.
Poor margins.
Excessive stock.
Equipment purchased from cash.
Owner drawings.
Weak financial controls.
Any of these can contribute to a tax debt problem.
Outstanding lodgements can make it harder to see which one is responsible.
What If the Business Has Strong Property Equity?
Potentially useful for certain secured finance options.
Suppose:
Commercial property value:
approximately $3.1 million
Existing secured debt:
$1.25 million.
That may be relevant.
But we don’t simply calculate the difference and assume it’s available.
The lender determines:
acceptable security,
valuation,
leverage,
serviceability,
and overall credit position.
Property Doesn’t Fix Unknown Tax Numbers
Even with substantial equity, we still need to understand:
how much finance is actually required
and
whether the business can afford it.
Security and serviceability are different questions.
What If the Owner Has a Home With Significant Equity?
Same caution.
Using residential property to address business tax debt can materially change the owner’s risk.
That decision deserves careful consideration and potentially appropriate professional advice.
Don’t Secure $500,000 Against Property Before Knowing Whether You Need $350,000
This is another reason to establish the tax position first.
If outstanding lodgements show the actual funding requirement is:
$350,000,
don’t unnecessarily borrow:
$500,000.
If they show the real requirement is:
$500,000,
don’t arrange:
$350,000
and discover the shortfall after settlement.
The Numbers Need to Meet in the Middle
Tax position.
Business cashflow.
Funding requirement.
Available security.
Debt-servicing capacity.
Those pieces need to fit together.
What If the Accountant Can Give Interim Figures?
Potentially useful.
Depending on the circumstances and lender, current management or interim information may help us understand the business while formal accounts are being completed.
But the accountant determines what they can accurately provide.
We don’t manufacture numbers to make a finance application work.
Don’t Guess Turnover Either
The owner says:
“We probably do around $7 million.”
Accounts show:
$6.4 million.
Use the actual number.
Same with:
profit,
debt,
cash,
and tax.
A good commercial application doesn’t need exaggerated figures.
It needs credible ones.
What If the ATO Debt Is Ultimately $500,000?
That’s okay.
Not okay in the sense that tax debt doesn’t matter.
Okay in the sense that:
now we know what we’re assessing.
A known $500,000 liability can be investigated.
An unknown liability can’t be responsibly solved with a guessed finance amount.
What Would I Want to Know Once the Lodgements Are Current?
Current ATO balance.
Whether there is a payment arrangement.
Whether current obligations are being maintained.
Annual turnover.
Profitability.
Cash position.
Debtors.
Existing finance.
Available security.
And:
what caused the tax debt.
Then we can determine whether finance may help.
What If the Updated Position Is Worse Than Expected?
Deal with the real number.
Suppose the owner expected:
$320,000.
The final position is:
$475,000.
That’s uncomfortable.
But it’s better to know before settlement than after.
Now we can assess whether:
finance,
cash,
asset sales,
an ATO arrangement,
or another strategy
may form part of the response.
Your accountant or tax adviser can provide guidance on the tax side.
What If It’s Better Than Expected?
Great.
Maybe the finance requirement falls.
Perhaps the business initially thought it needed:
$450,000
but now only needs:
$300,000.
Borrow less if less is genuinely required.
More Finance Is Not the Goal
The goal is:
the right structure for the actual problem.
If the business needs:
$300,000,
we don’t want:
$500,000
just because a lender may potentially offer it.
Debt has a cost.
Get the House in Order Before the Application Where Possible
If required lodgements can reasonably be brought up to date before finance is assessed, doing so can give everyone a clearer picture.
Sometimes the commercial situation is urgent and multiple things need to happen at once.
That’s fine.
But don’t hide the outstanding work.
Tell us at the start.
If Your BAS or Tax Returns Are Overdue, Start Here
Tell Thrive Broking:
your current known ATO balance,
which lodgements remain outstanding,
whether your accountant or tax agent is working on them,
whether you have an existing ATO payment arrangement,
annual turnover,
how long the business has traded,
existing business debt,
what finance you need,
and exactly what you want the money to do.
If your accountant can provide an indication of the likely updated position, that can also help us understand the scale of the issue.
Once the position becomes clearer, we can investigate finance options that may be relevant to the actual business.
Because if the ATO account says:
$320,000
but important lodgements remain outstanding,
the first question isn’t:
“Who will lend me $450,000?”
It’s:
“What do I actually owe, and how much finance do I really need?”
Get that right first.
Then build the finance around the real numbers.