Solutions
Business loans to clear ATO tax debt
An outstanding tax liability stops most bank refinances cold. Clearing it with a first or second mortgage over property the entity owns turns a running dispute into a single facility with a defined exit — and reopens the bank conversation.
Why tax debt blocks bank finance
Banks read an overdue ATO balance as a signal of cash-flow stress and as a competing creditor. A payment arrangement helps but rarely satisfies a bank credit policy, and a director penalty notice makes the position urgent. Meanwhile the general interest charge keeps compounding. For a trading entity with equity in its property, the fastest route is often to clear the ATO in full with a private loan, then refinance the whole position to a bank once the file is clean.
How the loan is structured
- Second mortgage behind the existing bank first. The most common structure when the bank loan is on good terms and the bank will consent. The second raises the amount needed to pay the ATO, with a 6–18 month term and an exit via refinance or sale. See how first-mortgagee consent works.
- Replacement first mortgage. Where the bank will not consent, or is already calling the loan, a private first mortgage refinances the bank and the ATO together into one facility.
- Direct payment to the ATO at settlement. Funders typically require the tax liability to be paid from settlement proceeds, with the ATO's payout figure confirmed in writing beforehand.
LVRs run to around 75% gross, including the capitalised interest where the structure is interest-capitalised. Pricing is set by the funder on each deal and disclosed in the term sheet.
What the funder needs to see
- The current ATO statement of account and any payment arrangement or notice on foot.
- The entity's property, its current mortgage and a realistic value.
- A business purpose that stands up: the debt is the company's, incurred in trade, and clearing it keeps the business operating. A director's personal tax debt is not a company purpose.
- An exit: the bank refinance that becomes possible once the ATO is cleared, a sale, or trading cash flow over a defined period.
Timing
A clean file settles in 5–10 business days from the term sheet. Where the ATO has issued a deadline, tell us the date on day one so the valuation and the first-mortgagee consent (if a second) are run in parallel. Our article on ATO debt blocking a refinance walks through an illustrative example end to end.
The products behind it
Second Mortgage Loans
Sit behind a major-bank or other priority lender. Raise capital without disturbing an existing first.
MoreFirst Mortgage Loans
Registered first mortgage over residential investment, commercial, industrial, rural or mixed-use property.
MoreFrequently asked questions
- Can I get a business loan with an ATO debt?
- Yes, if the borrower is a company or other entity with equity in real property. Private lenders treat clearing a company's tax debt as a legitimate business purpose and assess the security and the exit rather than the bank's view of the file.
- Will the lender pay the ATO directly?
- Typically yes. The ATO payout figure is confirmed before settlement and paid from the loan proceeds at settlement, so the liability is cleared the same day the loan draws.
- Can the loan cover a director's personal tax debt?
- No. The borrower is the company and the purpose must be the company's. A director's personal liabilities are outside the business-purpose test and cannot be funded through a loan we arrange.
- How soon after clearing the ATO can the bank refinance?
- That depends on the bank's policy and the entity's trading position. Many lenders want to see a clean ATO portal and a few months of normal trading. The private facility is written with a term long enough to make that realistic.
Related reading
Important — Business Purpose Lending Only
IMPORTANT — BUSINESS PURPOSE LENDING ONLY. Andorra Capital Solutions Pty Ltd (ACN 675 464 623 / ABN 32 675 464 623) is a commercial finance broker and introducer. We arrange property-secured business-purpose loans between Australian corporate borrowers and a panel of non-bank lenders and private investors. We do not provide credit ourselves. We do not arrange consumer credit and we do not arrange credit regulated by the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) or the National Credit Code. We are not an Australian Credit Licensee. Every loan arranged through us is either to a borrower that is not a natural person (outside the National Credit Code under section 5(1)) or for purposes that are wholly or predominantly business or investment purposes (outside under section 6(1)), or both. All borrowers are required to execute a Business Purpose Declaration and to evidence the true business purpose of the funds. No part of any loan arranged through us may be applied for personal, domestic or household purposes. If a borrower applies any part of the funds for a purpose to which the NCCP Act would apply, the borrower does so in breach of the loan agreement and indemnifies the lender against any resulting loss, claim or cost. The information on this website is general in nature, does not constitute financial, legal or taxation advice, and does not take into account your objectives, financial situation or needs. No interest rates, fees or other commercial terms are advertised on this website; pricing is determined by the relevant panel lender or private investor and is disclosed to the borrower as part of indicative terms. All loans are subject to credit assessment, satisfactory security, valuation, and execution of formal loan documentation by the relevant lender. For consumer credit (regulated under the NCCP Act), contact a licensed credit provider.