Guides · 15 October 2026
Owe the ATO money? What small business owners can do next
A tax debt feels personal. It isn’t. Plenty of good businesses fall behind in a growth year or a bad quarter. What matters is what you do in the next few weeks.
1. Keep lodging, even if you can’t pay
The ATO’s consistent message is to lodge on time even when you can’t pay in full. Failing to lodge adds penalties and makes it harder to agree a plan.
2. A payment plan may be simpler than you think
According to the ATO, if a business owes $200,000 or less, it may be able to set up a payment plan itself through Online services for business or the self-help phone line. Above that, or if the online option doesn’t work, you call the ATO. A registered tax or BAS agent can also set one up for you. The ATO’s payment plan estimator helps you work out an upfront amount and instalments.
3. The interest is no longer deductible
From 1 July 2025, ATO interest charges (GIC and SIC) can’t be claimed as a tax deduction. That makes carrying an ATO debt more expensive than it used to be, so it’s worth comparing a payment plan with other ways of paying it down.
4. New bills still need paying on time
A payment plan covers the old debt. Your next BAS and tax still need to be paid in full and on time, or the plan can fall over. This is where a separate tax account helps; see our cash flow and BAS habits.
5. Fix the cause, not just the bill
Most ATO debts come from one of three things: tax not being set aside as money comes in, a profitable year nobody planned for, or growth that ties cash up in stock and unpaid invoices. A short 13-week cash flow forecast shows which one it is.
Who to talk to
Your accountant or registered tax agent first. If the business is under real financial pressure, the Australian Small Business and Family Enterprise Ombudsman and free small business financial counselling services can also help.
Quick answers
Can a small business set up an ATO payment plan online?
The ATO says businesses owing $200,000 or less may be able to set one up through Online services for business or the self-help phone line.
Is ATO interest tax deductible?
Not any more. GIC and SIC incurred on or after 1 July 2025 can’t be claimed as a deduction.
Want to see your own numbers?
If you were sent a pack with a code, enter it on the Got a code? page to open the calculators. Otherwise, book a 15-minute chat with Tereza or take the free business tax health check.
Sources
General information only. This doesn’t take your circumstances into account and isn’t tax, financial or legal advice. Talk to your accountant or registered tax agent before acting. PRM is not a registered tax agent; tax agent services are provided by Australian Tax & Super Pty Ltd (TPB 25291395).