ATO Payment Plans – The Pro’s and Con’s!

  • 31 October, 2019
  • Greg Pierlot

Recently we have noticed an increasing number of business owners either entering ATO Payment Plans or considered it in consultation with their accountants.

It could be coincidental; however, it would not be too far- fetched to assume it is in part due to the current economic conditions and tightening of access to credit from lenders.

Why do Accountants suggest businesses enter ATO Payment Plans?

Accountants will often suggest clients consider an ATO Payment Plan because:

  • To do nothing is simply not in their client’s interest
  • Obtaining Bank finance to clear tax arrears is too hard or impossible in their eyes
  • Other reasons for suggesting a Payment Plan include:
  • It can provide peace of mind, reduce uncertainty and makes forward planning easier
  • To relieve cash flow pressures
  • The relatively easy process involved
  • Security is not required – the loans are unsecured
  • They come with an affordable interest rate (The interest may also be refundable depending on situation and term)

What are the potential downsides to an ATO Payment Plan?

The major downside to an ATO Payment Plan is that it can limit your capacity to borrow funds from a major Bank for business or even personal purposes!
The brutal reality is that most major lenders do not look favourably on a business that has entered into a payment plan with the ATO.

ATO Payment Plans – Bank Perception

Whilst entering an ATO Payment Plan may be a necessary and even prudent step, from a Bankers perspective it may signal:

  • The business cashflow management and forward planning is poor
  • There may be other issues! It is the “tip of an iceberg”.
  • The business is struggling and in trouble
  • The business could struggle to meet its other financial obligations (i.e. are our existing borrowings at risk and if we lend the more, will we get it back?)

Plan Ahead and Explore All Options!

If you do not have existing Bank finance, or plan on obtaining any additional funding in the short term, then an ATO Payment Plan will not be a big issue.

However, if you have finance, or are looking to obtain finance in the next 12 months, we suggest the following;

Engage your Accountant and importantly, a Finance Specialist, early to explore the alternatives that may be available – in this case a joint meeting can be helpful

Investigate whether funds can be released from the balance sheet via Equipment Finance sale and leaseback, Debtor Finance, directors’ loans or unpaid earnings etc.

Explore options for clearing the ATO debt via alternative lenders – (This may be an option and help to preserve your “bankability” should you have a financing need in the near to medium term)


Whilst at times there are no other options than to enter an ATO Payment Plan, if you have existing borrowings or a likely future need, it is important to plan ahead and explore all available options before taking this step!

Critically, for all matters related to tax, early involvement and guidance of your Accountant is essential!

The 500 Group are financiers and not Tax Advisors! We do however work closely with Accountants to ensure their clients financing arrangements are appropriately, and prudently, structured.

If you are considering finance in the next 12 months and would like to understand your borrowing potential, call me on