Tax debt keeps compounding while it sits with the ATO. We arrange lending that clears it using your home equity, then plan the path back to a clean, mainstream structure.
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If you own property with usable equity, a refinance can pay your ATO debt in full at settlement and roll it into your mortgage. The debt then runs at a home loan rate over a home loan term, instead of compounding daily with the ATO.
It suits business owners, contractors and company directors who fell behind on income tax or BAS and want one repayment they can plan around. If the business is still running at a loss, refinancing buys time but the tax debt tends to return.
An illustrative sketch, not a quote. Your home is worth $900,000 with a $500,000 loan. Many lenders cap lending at 80% of value, or $720,000, leaving up to $220,000 of usable equity before costs. A $90,000 tax debt fits inside that, but serviceability, the lender's own limits on consolidation and fees still apply.
Refinancing restructures the debt. It does not reduce it, and spreading it over 25 or 30 years can mean more total interest unless you pay that portion down quickly.
Many mainstream lenders read ATO debt as a sign of cash flow stress. Policies vary and change, but the common sticking points are:
Some lenders will consolidate ATO debt when it sits on a plan that is being met, lodgements are current and the rest of the application is strong. Others decline it outright. We check current policy before anything is lodged.
A payment plan does not stop the clock. The ATO states that debts on a payment plan continue to accrue the general interest charge (GIC), compounding daily, although interest-free plans may be available for some overdue activity statement amounts.
Where the major lenders say no, specialist and near prime lenders often say yes, at a higher rate and sometimes with higher fees. Many accept alt doc income evidence, such as recent BAS, business bank statements or an accountant's letter, where full financials are not the best picture of current earnings.
In our ATO debt refinance case study, a self-employed director consolidated $160,000 of ATO debt into a $445,000 loan at 60% LVR, with her income evidenced by her four most recent BAS and a declaration.
Specialist lending is usually a bridge. The plan should set out when you can move back to a mainstream lender once the debt is cleared and your returns are clean. Check exit costs too: some specialist products carry early repayment or discharge fees in the first years.
The rules changed from 1 July 2025. The ATO confirms that GIC and shortfall interest charge (SIC) incurred on or after 1 July 2025 are not deductible. That removes one of the old reasons to leave a debt sitting with the ATO.
Interest on money borrowed to pay a personal income tax debt is generally not deductible either, because paying tax does not produce assessable income. Business tax debts, such as BAS or PAYG withholding owed by a business, can be treated differently depending on the entity and how the borrowing is used.
Treat the tax debt portion of your loan as non-deductible unless your registered tax agent confirms otherwise. We set it up as its own split so the treatment is clear either way.
Expect more paperwork than a standard refinance. Depending on the lender and how your income is evidenced:
Our loan application document checklist lists the standard items to gather first.
A self-employed company director refinanced her $750,000 investment property to consolidate $160,000 of ATO debt, release $25,000 for improvements and remove her ex-partner from the loan. The $445,000 alt doc loan at 60% LVR was evidenced by her four most recent BAS and a declaration.
Read the Case Study →Debt recycling needs a stable loan with clean splits, a lender that allows a separate investment split, and income that services the extra borrowing. A loan carrying a fresh ATO consolidation on a specialist product rarely ticks those boxes yet.
The order we usually plan for:
Consolidate the tax debt in its own split and bring every lodgement up to date.
Keep tax, BAS and loan repayments current, and direct extra repayments at the tax debt split first.
Once your returns and repayment conduct support it, we arrange a refinance set up for debt recycling.
Add a separate investment split only once your adviser and tax agent are on board and you hold a cash buffer.
Keeping deductible and non-deductible borrowing in separate splits from the first day means nothing needs untangling later. See how we build a debt recycling loan structure.
Tell us where you are and what you want to do next. We will tell you what the lending side looks like, including whether debt recycling fits later.
Request a Call With Alex →Most of our ATO debt clients are business owners. See how we work with self-employed borrowers.
Often, yes, if you have enough usable equity and the rest of your application is sound. Many mainstream lenders are cautious with tax debt, especially when it is overdue or a payment plan has been missed. Specialist lenders are more flexible, usually at a higher rate. We check which lenders will consider your situation before you apply.
No, not for charges incurred from 1 July 2025. The ATO confirms that general interest charge and shortfall interest charge incurred on or after 1 July 2025 are not deductible. Ask your registered tax agent how this applies to your own returns and to any charges incurred before that date.
Some will. Many lenders want to see the plan in place and every instalment met, with lodgements up to date. Missed instalments or an unarranged overdue debt narrow the options considerably. The ATO notes that debts on a payment plan generally keep accruing interest, so clearing the plan with a refinance can reduce what you pay.
Interest on money borrowed to pay a personal income tax debt is generally not deductible, because paying tax does not produce assessable income. Business tax debts can be treated differently depending on the entity and the use of the funds. Your registered tax agent confirms the treatment. We keep the tax debt in its own split so the records are clear.
Usually not. Debt recycling works best on a stable, mainstream loan with clean splits and comfortable servicing. Most clients first clear the tax debt, rebuild a record of on-time lodgements and repayments, then refinance to a lender that suits a recycling structure. We plan that sequence with you and your accountant from the start.
How lenders read business income, trusts and add-backs.
Read more → SERVICEWhen your current loan cannot split cleanly, and what changes.
Read more → GUIDESigns the timing is wrong, and what to fix first.
Read more →
1. Arranged a loan when our small business situation made it difficult to qualify.
2. Met requirements to have funding available by a specified date.
3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
Alex, Jess and the Kingfisher team were second to none and their process from start to finish was faultless. As a self-employed business owner, it can be difficult to obtain finance at the best of times. The Kingfisher team made this an easy and efficient proposition and their continued transparent and efficient communication ensured we were kept up to date at all times. Highly recommend them for your finance needs!
Alex and Jess dealt with our investment loan and provided a top tier service. They kept us up to date and communicated every step of the process making it a seamless and smooth experience! Awesome work team we will definitely be back for future loans!
Jess from Kingfisher was outstanding. I couldn't fault her communication, expertise or dedication to finding the best loan for our situation. The entire process was seamless from start to finish. We'll definitely be using Kingfisher again in the future. A top-tier organisation.
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Talk it through with Alex
Bring a rough picture of your home loan, income and savings. You will come away knowing whether the lending side looks workable.
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