You open the business account.
Wages are due Thursday.
Suppliers need paying.
There is GST from the last BAS.
PAYG withholding.
Income tax.
Maybe super obligations as well.
And sitting behind all of it is an ATO debt that has grown to:
$85,000.
The business is still operating.
Customers are still paying.
There is work booked.
You aren’t necessarily running a failed business.
But every month there seems to be another tax obligation arriving before you’ve dealt with the previous one.
So what do you actually do?
For some businesses, the answer may be an arrangement directly with the ATO.
For others, it may involve restructuring cashflow.
Some may investigate business finance.
Some may have money trapped in unpaid customer invoices.
Some may need to sell an asset, inject capital or make much harder changes to the business.
And sometimes the right answer is:
don’t borrow more money.
Before looking for a loan to pay the ATO, work out why the debt exists.
The Bunbury Business
Imagine an established Bunbury business.
It has been operating for:
nine years.
Annual turnover is approximately:
$2.4 million.
It employs:
eight people.
The business is busy.
Revenue isn’t the obvious problem.
But it owes the ATO:
$92,000.
The owner says:
“I just want to borrow $92,000 and get rid of it.”
Maybe.
But I would want to know much more before treating finance as the solution.
How Did the $92,000 Build Up?
This question matters more than the balance itself.
Was it:
one difficult quarter?
rapid growth?
slow-paying customers?
a major customer failure?
equipment repairs?
poor cashflow management?
tax money being used to fund operations?
several loss-making months?
an existing ATO payment plan the business couldn’t maintain?
Or has the business simply been spending more than it earns?
Those are completely different problems.
ATO Debt Is Often the Symptom
The tax debt is visible.
That’s why it gets the attention.
But the underlying problem may be somewhere else.
Suppose the business generates:
$200,000
in monthly sales.
That sounds healthy.
But customers take:
45 to 60 days
to pay.
Meanwhile, the business pays:
wages weekly,
suppliers in 14 days,
fuel immediately,
rent monthly,
and tax obligations as they arise.
The business may be profitable but constantly short of cash.
The ATO can become the place where that cashflow pressure accumulates.
Or the Business May Actually Be Losing Money
Different scenario.
Revenue:
$200,000 per month.
Actual operating costs:
$215,000.
The business loses:
$15,000 every month.
It hasn’t been paying all its tax because the cash isn’t there.
Now borrowing:
$92,000
to clear the ATO doesn’t solve the underlying problem.
It potentially creates:
ATO balance: $0
new business loan: $92,000
plus repayments
while the business continues losing $15,000 a month.
Within months, another tax debt could begin building.
That’s not a debt solution.
That’s moving the debt.
Start With the Current ATO Position
Before investigating finance, establish exactly what is owed.
Not:
“About $80,000.”
Get the current information.
What taxes are included?
What periods?
What amounts are overdue?
Is there an existing payment arrangement?
Has the business missed payments?
Are lodgements current?
Has the ATO issued correspondence requiring action?
If you’re uncertain about your tax position, speak with your accountant or tax adviser and obtain the current details.
Don’t Ignore ATO Correspondence
If the ATO is contacting the business, deal with it.
Putting the letter in a drawer doesn’t improve the position.
Neither does avoiding calls because you don’t yet know how you’ll pay.
The available options can depend heavily on the business’s circumstances and where the matter has progressed.
Your accountant, tax adviser or the ATO can help you understand the tax position and any available ATO arrangements.
Option One: Deal Directly With the ATO
Before taking out finance, determine whether the business can manage the debt directly.
Depending on eligibility and circumstances, the ATO may allow taxpayers to set up payment plans for tax debts.
The arrangement needs to be realistic.
That’s important.
Don’t agree to a repayment simply because it gets the immediate conversation over with.
Can the Business Actually Afford the Payment Plan?
Suppose:
ATO debt:
$92,000.
The business agrees to a payment arrangement requiring a substantial upfront payment followed by regular repayments.
Don’t look only at whether this week’s payment is available.
Ask whether the business can meet:
the ATO payment,
new tax obligations,
wages,
suppliers,
existing loans,
and normal operating expenses
at the same time.
Because the business generally still needs to stay on top of new obligations while dealing with the old debt.
The Old Debt Isn’t the Only Tax Bill Coming
This is where businesses can get trapped.
They focus entirely on:
the $92,000 historical debt.
But the business is still trading.
Another BAS period arrives.
More PAYG obligations arise.
Income tax may arise.
Other obligations continue.
If the business can pay the historical debt only by failing to meet the next tax obligation, the plan isn’t fixing the problem.
Test the Next Six Months
Take the proposed repayment.
Then forecast:
normal business income,
wages,
suppliers,
rent,
loan repayments,
tax,
super obligations,
and other major costs.
Can the business manage all of it?
Not in a perfect month.
In a normal month.
And in a weaker month.
Option Two: Improve the Operating Cashflow
Sometimes the business doesn’t need another loan.
It needs to change how cash moves through the business.
Look at:
customer payment terms,
invoicing delays,
supplier terms,
stock levels,
unprofitable work,
owner drawings,
overheads,
and unnecessary expenditure.
There may be cash trapped inside the operating cycle.
Invoice Faster
It sounds simple.
But it matters.
Work completed Friday.
Invoice sent the following Thursday.
Customer pays 30 days from invoice.
The business has effectively created an extra:
six-day delay
before the payment period even begins.
Across a large customer ledger, that can materially affect cashflow.
Chase Receivables
Suppose the business has:
$310,000
of unpaid customer invoices.
Of that:
$170,000 is current
$90,000 is 30 to 60 days
$50,000 is more than 60 days overdue.
Before borrowing $92,000, understand whether some of the business’s own money can be collected faster.
But Don’t Assume Receivables Solve Everything
A large debtor ledger can look comforting.
But are the invoices:
valid?
undisputed?
collectable?
And when will customers actually pay?
A business can have:
$300,000 owed to it
and
$5,000 in the bank.
That’s exactly why cashflow needs to be understood.
Option Three: Investigate Invoice Finance
If the business regularly invoices eligible business customers and waits for payment, invoice finance may potentially allow it to access part of the value of eligible invoices earlier, depending on the provider, debtor ledger and circumstances.
We built an entire Thrive journey around this problem.
The important distinction here is:
invoice finance isn’t necessarily:
“a loan to pay the ATO.”
It may address the underlying working-capital cycle that contributed to the tax debt.
That can be a much more important question.
Example
Business has:
ATO debt: $92,000
Eligible unpaid invoices: $280,000
Strong customers
Long payment terms
Profitable operations
The business’s problem may be that too much cash is continually trapped between:
doing the work
and
getting paid.
In that situation, addressing the receivables cycle may be worth investigating alongside the ATO debt itself.
Option Four: Business Finance
A business may investigate finance to pay or restructure an ATO debt.
Whether finance is available will depend on matters such as:
the business,
trading history,
financial position,
tax position,
credit profile,
existing debts,
security if relevant,
and lender requirements.
Finance isn’t automatically available simply because the business has turnover or assets.
Why Would a Business Finance ATO Debt?
There can be several reasons.
Perhaps the business wants to:
clear an ATO balance,
replace an unsustainable payment arrangement,
consolidate certain business debts,
restore working-capital flexibility,
or deal with a historical tax problem while the underlying business is now performing differently.
The commercial reason needs to make sense.
Example: A Historical Problem
Suppose the Bunbury business had a difficult year.
A major customer failed.
The business lost:
$140,000
in unpaid invoices.
During that period, the ATO debt grew.
Since then:
the customer base has diversified,
revenue has recovered,
margins have improved,
and the business is profitable again.
The remaining:
$92,000 ATO debt
may be a legacy of that earlier event.
That’s different from a business currently losing money every month.
Example: Rapid Growth
Another business grows from:
$1.2 million
to
$2.5 million
turnover in eighteen months.
Sounds excellent.
But growth requires:
more employees,
more stock,
more vehicles,
more fuel,
more suppliers,
and more working capital.
The owner uses cash that should have been available for tax to keep funding the growth.
Now the business has:
more revenue
and
an ATO debt.
Again, the tax debt is telling us something about the way the growth was funded.
Finance May Clear the Debt Without Fixing the Growth Cycle
Suppose we arrange finance for:
$100,000.
ATO cleared.
Excellent.
But the business is still growing quickly and still doesn’t have enough working capital.
Six months later:
ATO debt:
$45,000.
New loan:
still outstanding.
Now the business has both.
That’s exactly what we want to avoid.
Ask What Happens the Day After the ATO Is Paid
This is one of the most useful tests.
Imagine:
ATO balance tomorrow:
$0.
What changes inside the business?
Does cashflow become sustainable?
Can the business meet new tax obligations?
Does it still have enough working capital?
Are customers still paying too slowly?
Is the business profitable?
If nothing changes except the name of the creditor, be cautious.
Option Five: Secured Business Finance
Some businesses may have assets or property that potentially allow secured finance options to be investigated.
Secured finance can have different:
pricing,
terms,
loan amounts,
and risks
from unsecured business finance.
But security doesn’t magically make poor debt sustainable.
Property Security Changes the Risk
If business debt is being secured against property, understand what that means.
You’re potentially moving a business liability into a facility secured by a significant asset.
That requires careful consideration.
A lower repayment isn’t enough reason by itself.
Don’t Put Property at Risk Just to Make the Monthly Number Look Better
Suppose:
ATO repayment arrangement:
high monthly commitment.
Secured loan:
much lower monthly repayment because the debt is spread over a longer period.
The second number looks easier.
But now consider:
total interest,
loan term,
security,
and what happens if the business struggles.
The structure needs to make sense beyond this month’s cashflow.
Option Six: Unsecured Business Finance
Depending on the business and lender, unsecured business finance may also be worth investigating.
Potential advantages can include not requiring property security.
But the structure may have:
different pricing,
shorter terms,
or higher repayments
than some secured options.
Again, compare the whole facility.
Don’t Choose Secured or Unsecured From the Advertisement
The right question isn’t:
“Which one has the lowest rate?”
It’s:
What amount is required?
What can the business afford?
What security is available?
How long should the debt reasonably remain outstanding?
What is the total cost?
What risks does the business accept?
What happens to cashflow afterward?
Option Seven: Use Business Cash
Sometimes this is overlooked.
Suppose:
ATO debt:
$92,000
Cash reserves:
$260,000.
The owner wants finance because:
“I don’t want to touch the cash.”
Maybe finance is appropriate.
Maybe not.
What is the $260,000 needed for?
Payroll?
Stock?
Upcoming equipment?
Tax?
Emergency reserve?
Expansion?
If $150,000 of that cash is genuinely surplus, borrowing the entire ATO balance may not automatically be the best commercial decision.
Cash Has a Value Too
Keeping liquidity can be important.
But borrowing also has a cost.
The answer may involve:
using some cash
and
financing some debt.
It doesn’t always have to be:
100% cash
or
100% finance.
Option Eight: Sell an Asset
Does the business own equipment it no longer needs?
Vehicle?
Machine?
Trailer?
Unused stock?
Non-core asset?
Selling an underutilised asset may potentially release cash without creating another debt.
Again, don’t automatically borrow if the business already owns something that no longer contributes meaningfully.
Don’t Sell a Productive Asset Just to Clear the ATO
The reverse also matters.
If a machine generates:
$25,000 per month
of profitable revenue, selling it to clear tax debt may damage the business’s ability to earn.
Asset sales need to be commercially sensible.
Option Nine: Owner Capital
Depending on the business structure and circumstances, owners may consider injecting their own capital.
That is a decision to discuss with the appropriate accounting and financial advisers.
Don’t casually move personal money into a struggling business without understanding why the business needs it and whether the underlying problem has been fixed.
Option Ten: The Business May Need Restructuring Advice
Sometimes the problem is beyond ordinary finance.
If a business cannot:
pay debts as they fall due,
maintain tax obligations,
meet wages or super obligations,
or see a realistic pathway back to sustainable trading,
additional borrowing may not be appropriate.
That’s when professional accounting, legal or restructuring advice may be required.
Finance should not be used to delay dealing with a fundamentally insolvent or unviable business.
A Broker Is Not Your Tax Adviser
Thrive Broking can investigate finance options.
We don’t replace:
your accountant,
tax adviser,
lawyer,
or insolvency/restructuring professional.
If the issue involves:
tax treatment,
ATO negotiations,
legal consequences,
director obligations,
or insolvency,
obtain advice from the appropriate professional.
The Size of the ATO Debt Doesn’t Tell Me Enough
Business A:
ATO debt:
$40,000
Turnover:
$350,000
Losing money
No cash reserve
Overdue suppliers
That $40,000 may be extremely serious.
Business B:
ATO debt:
$250,000
Turnover:
$8 million
Profitable
Strong balance sheet
Temporary cashflow event
The larger debt doesn’t automatically mean the weaker business.
Context matters.
Debt Relative to the Business Matters
Instead of asking:
“Is $100,000 of ATO debt bad?”
ask:
How large is it relative to:
turnover,
profit,
cashflow,
assets,
existing debt,
and the business’s ability to repay it?
That’s a much more useful assessment.
How Quickly Is the Debt Growing?
Another important question.
ATO balance three months ago:
$55,000.
Today:
$92,000.
Why has it increased:
$37,000
in three months?
If the underlying problem continues, finance today may only reset the clock.
Or Is the Debt Falling?
Different story.
ATO debt six months ago:
$140,000.
Today:
$92,000.
The business has already paid:
$48,000
down.
That’s useful context.
It may indicate the business has been actively dealing with the problem.
Are Lodgements Up to Date?
This can matter when finance is being considered and is important for understanding the tax position generally.
If the business hasn’t lodged required returns or activity statements, the apparent ATO balance may not tell the full story.
Speak with your accountant or tax adviser and get the position current.
Don’t Wait Until Friday Afternoon
If you know:
an ATO payment is due,
a payment arrangement is becoming difficult,
or you need to investigate finance,
start early.
Urgency limits options.
A business finance application can require:
documents,
assessment,
questions,
and settlement steps.
Not every situation can be solved overnight.
Bunbury Businesses Can Have Very Different Cash Cycles
A business operating around Bunbury might be involved in:
transport,
construction,
trades,
manufacturing,
agriculture-related services,
equipment,
professional services,
or another commercial sector.
The cash cycle can vary enormously.
A contractor waiting on progress payments has a different problem from a retailer receiving customer payments immediately.
That’s why we don’t start with:
“Here’s an ATO loan.”
We start with:
“Why does the business owe the ATO?”
A Busy Business Can Still Have a Tax Problem
This surprises owners.
They think:
“We’re flat out. How can we have no money?”
Because activity isn’t the same as cash generation.
You can be:
busy,
growing,
invoicing heavily,
and still be short of cash.
The question is what happens between:
sale
and
cash in the bank.
Profit Doesn’t Always Equal Cash
A business may record profit while money is tied up in:
debtors,
stock,
equipment,
or other working-capital requirements.
That’s why the accountant’s profit figure and the bank balance can feel disconnected.
Understanding that difference can help explain why the ATO debt developed.
But “Cashflow Problem” Shouldn’t Become an Excuse
Some businesses say:
“We’re profitable. It’s just cashflow.”
For years.
If the business repeatedly cannot pay:
tax,
suppliers,
or other commitments,
the issue deserves deeper investigation.
Persistent cashflow problems can indicate:
poor margins,
overtrading,
excessive debt,
weak collections,
high drawings,
or structural problems.
Don’t label everything:
“cashflow.”
Find the cause.
What Would I Want to See Before Investigating ATO Debt Finance?
Start with:
current ATO debt amount
what the debt relates to
whether lodgements are current
whether a payment plan exists
business turnover
how long the business has traded
current business debts
and
why the ATO balance developed.
Depending on the finance being investigated, we may then need additional information such as:
financial statements,
bank statements,
BAS,
ATO information,
asset and liability details,
property information if relevant,
and other lender-required documents.
Tell Me What You Want the Finance to Achieve
Not simply:
“Pay the ATO.”
Do you want to:
clear the entire debt?
replace a payment arrangement?
clear only part?
consolidate other business debt as well?
preserve working capital?
deal with historical debt before applying for equipment finance?
The objective matters.
Tell Me What Happens After Settlement
This is the question I would keep returning to.
If Thrive arranges finance and the ATO debt is cleared:
what does the business look like next month?
And:
three months later?
Six months later?
If the answer is:
profitable,
new tax obligations being paid,
adequate working capital,
and the new finance repayment comfortably managed,
then there may be a sensible finance discussion to have.
If the answer is:
“We’ll probably start falling behind again,”
we haven’t solved the problem.
Owe the ATO Money and Don’t Know What to Do Next?
Start by getting the current position.
Speak with your accountant or tax adviser where appropriate and establish:
how much is owed
what is overdue
whether lodgements are current
and
what ATO arrangements may be available.
Then look at why the debt exists.
If the underlying business is viable and you want to investigate whether business finance could form part of the solution, send Thrive Broking:
the approximate ATO balance
business turnover
how long you’ve been trading
whether you have an ATO payment plan
what other business debts you have
and
a short explanation of how the tax debt developed.
We can then investigate whether there are finance options worth considering and what information may be required.
Because the objective isn’t simply to make:
ATO debt disappear today.
It’s to put the business in a position where the same debt doesn’t start building again tomorrow.