The short answer
An ATO payment plan is an arrangement to pay an overdue tax debt in weekly, fortnightly or monthly instalments over a fixed period, while keeping new lodgements and payments up to date. Businesses that owe $200,000 or less can usually set one up themselves through Online services for business or the ATO's self-help phone line, or through their tax or BAS agent (ATO). Debts over $200,000, plans longer than two years, recent defaults or warnings of firmer action mean phoning the ATO and explaining your finances. Each account needs its own plan, so an activity statement debt and an income tax debt are two plans. The general interest charge keeps accruing on the balance, at 11.51% a year for October to December 2026, compounding daily, and it hasn't been tax-deductible since 1 July 2025. Eligible small businesses can get an interest-free plan on activity statement debts of $50,000 or less. Missing an instalment can make the full balance payable.
Key points
- Business debts of $200,000 or less can usually be put on a plan online or by phone.
- GIC keeps running on a plan and hasn't been deductible since 1 July 2025.
- Some small businesses qualify for an interest-free plan on activity statement debts.
What is an ATO payment plan?
It's an agreement with the ATO to pay a tax debt in instalments instead of all at once. You agree an amount and frequency, usually by direct debit, and the plan runs until the balance is cleared. The ATO's starting point is that debts should be paid in the shortest time you can manage, because the general interest charge keeps running for as long as the debt is outstanding.
The plan has two conditions that matter as much as the instalments: lodge everything on time, and pay any new tax debts in full when they fall due. Breaking either can cause the plan to default.
Can you set up a payment plan online?
If your business owes $200,000 or less, usually yes. There are three self-service routes:
- Online services for business: log in, then select Accounts and payments, then Payment plans.
- The self-help phone line, with your ABN and the exact debt for one account ready.
- Your registered tax or BAS agent, through Online services for agents.
The online system suggests an upfront payment and instalments that have worked for similar businesses, and lets you vary them within limits. You can only set up one plan at a time this way. The ATO's online payment plan estimator lets you test options first, though it can't be used for super guarantee charge debts.
When do you need to call the ATO?
You'll need the lodge and pay enquiry line if:
- you owe more than $200,000
- you need longer than two years to pay
- the online or self-help phone attempt wasn't accepted
- you want to renegotiate an existing plan
- you've had a warning of firmer or legal action in the past six months
- you've defaulted on or cancelled two or more plans in the past 12 months
- you're insolvent, in dispute or in serious hardship.
Expect questions about why you can't pay, your bank balances and credit lines, income, expenses and assets. Have your cash flow numbers ready before you call.
Do you need more than one plan?
Often, yes. The ATO keeps separate accounts, and each overdue account needs its own plan. A business behind on both its BAS and its income tax needs two plans. Don't add the amounts together when setting one up, and don't leave an account without a plan, because that account can still attract firmer action.
What does a payment plan cost?
Interest applies for as long as any of the debt is on a plan. The general interest charge for October to December 2026 is 11.51% a year, compounding daily, or about 12.2% over a full year. Since 1 July 2025, it's no longer deductible.
| Debt | Time to repay | Approximate GIC if carried throughout |
|---|---|---|
| $40,000 | 6 months | About $2,400 |
| $60,000 | 12 months | About $7,300 |
| $100,000 | 12 months | About $12,200 |
Calculated at 11.51% a year compounding daily on the full balance. Instalments reduce the balance over time, so actual interest on a plan will be lower.
Any tax refunds or credits during the plan are used to reduce the debt, but they don't replace the next instalment.
Can you get an interest-free payment plan?
Some small businesses can. The ATO offers interest-free plans over 12 months for overdue activity statement amounts when the business:
- has annual turnover under $2 million
- owes recent activity statement amounts of $50,000 or less, overdue for up to 12 months
- has a good payment and lodgement history, with no more than one plan default in the past 12 months and no outstanding activity statement lodgements
- can't obtain finance through normal business channels
- can show it's still viable.
The GIC is still charged but remitted automatically while you keep to the plan. If you already have a standard plan and meet the criteria, you can ask the ATO to switch it.
What is a secured payment plan?
If the ATO can't agree terms with you, it may accept security in exchange for more time or instalments. Its preferred securities are a registered mortgage over freehold property or an unconditional bank guarantee from an Australian bank. A secured plan still accrues GIC.
What happens if you miss an instalment?
A missed instalment or a late lodgement can see the plan default, making the full overdue balance payable and opening the door to firmer action such as garnishee notices and director penalties. Set up direct debit and reminders, and call the ATO before an instalment is due if you know you'll miss it. Our guide to what happens if you default covers the next steps.
Credit cards and payment plans
The ATO has said that after 30 June 2027, credit cards can no longer be used to make payments to it. Plans linked to a credit card will need to move to another payment method, or later instalments will fail and the plan may fall into arrears.
Payment plan or business loan?
| Feature | ATO payment plan | Business loan |
|---|---|---|
| Interest | GIC at 11.51% (Oct to Dec 2026), not deductible | Depends on the lender, generally deductible |
| Setup | Online in minutes for debts up to $200,000 | Hours to weeks, depending on the loan type |
| Effect on the ATO | Debt stays with the ATO until paid | The ATO is paid in full at settlement |
| If things go wrong | Default makes the whole balance payable | The lender's default terms apply |
| Credit reporting | Keeping a plan generally counts as engaging with the ATO | The ATO debt is cleared |
A plan is usually the cheapest start for a manageable debt. A loan can make sense when the debt is large, the plan terms would strain cash flow, a previous plan has defaulted, or a director penalty notice deadline is running. ATO debt funding explains how refinancing a tax debt works.
Sources
General information only. It doesn't take your circumstances into account and isn't tax, legal or financial advice. Speak to your accountant or a lawyer about your situation.
