Key takeaways
- •Selling your business can pay your company's Australian Taxation Office (ATO) debt, but only on settlement day. Until the sale settles, the general interest charge adds to the ATO balance every day.
- •When a business sale settles, lenders with security over what is being sold are generally paid first. The settlement directions your solicitor gives then decide where the rest of the sale money goes.
- •In a property sale, the ATO can send a garnishee notice to the solicitor, the purchaser or the agent, which they must follow, and take the money left after secured lenders are paid.
- •If your company sells real property with the business, such as its premises, it needs a clearance certificate from the ATO, or the purchaser must withhold 15% of the price. Applications can take up to 28 days.
- •When a purchaser withholds 15% of the price because there is no clearance certificate, that amount is refunded in full only where there are no tax debts and no capital gains tax payable on the sale.
- •A bridging loan from Secured Lending, from $250,000 and backed by property, gives your company the funds to pay the ATO in full before the sale settles. Your company repays it through an exit agreed before settlement.
Yes, the money from selling your business can pay your ATO debt. The difficulty is timing. A business sale can take weeks or months to settle, and the Australian Taxation Office does not have to wait for it: the general interest charge keeps adding to the balance, and the ATO can still take collection action until the debt is paid. Below is how the sale money is divided at settlement, what can hold it up or redirect it, and how your company can pay the ATO before settlement instead.
We would be glad to help your company pay the ATO now rather than on settlement day. A bridging loan backed by property is a good fit for a business that is being sold, because it pays the ATO in full before the sale settles, and your company repays the loan through the exit agreed with us. We lend our own funds, in most cases we decide in hours, and we can settle within 24 hours.
How the sale money is divided at settlement
As a general pattern, the purchaser pays the price at settlement, and your solicitor gives settlement directions that say who receives it. Lenders with security over what is being sold are paid out first, so their security can be released: a mortgage over the premises if they are part of the sale, or a bank's security interest over the business's assets. Your directions can then pay other debts, including the ATO, and your company receives the balance. Your solicitor will confirm the exact order for your sale.
A garnishee notice changes who decides how the money is paid. Among the steps the ATO lists for collecting from businesses through a garnishee notice is action on property sale proceeds:
"a garnishee notice can be issued to a solicitor, the purchaser, or the agent involved in the sale. We garnishee the surplus equity after secured creditors are paid."
The same page says the ATO can also issue a notice to businesses or individuals who owe your company money, and the person who receives a notice must follow it. So once a notice is issued, the ATO is paid from the surplus before your company's own directions apply. The ATO sends a warning letter before it issues a garnishee notice, which is the time to act.
What can hold up settlement, and what the ATO can do meanwhile
A signed contract does not fix the settlement date. These are steps that can push it back:
- •The landlord's consent to transferring the lease, which business.gov.au lists among the checks a buyer makes, and which can take time.
- •The buyer's finance, which runs on the buyer's bank's timetable.
- •A clearance certificate, if real property is part of the sale (covered below).
- •The release of debts owing on business assets registered on the Personal Property Securities Register.
While those steps are under way, the ATO debt keeps growing and the ATO can still act. The general interest charge compounds daily, including on debts under a payment plan, according to the ATO's payment plans page. For October to December 2026 the general interest charge rate is 11.51% a year, and general interest charge incurred on or after 1 July 2025 cannot be claimed as a tax deduction.
As an estimate, a $300,000 balance left unpaid for 90 days at that rate adds about $8,630 in general interest charge, assuming the rate does not change. Over the same period the ATO can still issue a director penalty notice or a garnishee notice.
A bridging loan that pays the ATO now
A bridging loan from us gives your company the funds to pay its ATO balance in full before settlement. The loan funds are paid to your company, which then pays the ATO. One loan can cover income tax, activity statement debts and superannuation guarantee charge together, and we can still lend after a garnishee notice or a director penalty notice has been issued.
| Loan feature | Detail |
|---|---|
| Borrower | Your company |
| Loan size | From $250,000, with larger loans assessed case by case |
| Interest rate | From 9.7% p.a., and from 11.95% p.a. for a second mortgage |
| Term | 1 to 24 months, most often 3 to 6 months |
| Security | A first or second mortgage over residential, commercial or industrial property |
| Maximum loan-to-value ratio | 70% of the property's value, including any existing mortgage |
| Repayment | Through a defined exit agreed before settlement |
The security can be one of two kinds of property. The first is the commercial or industrial property your business trades from, if your company owns it and it is being sold with the business: our mortgage is then repaid and discharged from the sale proceeds at settlement. The second is a director's home or investment property, or another property your company owns, in which case your company repays us through the exit agreed before settlement. A second property can be added where one does not have enough equity, as long as total borrowing stays within 70% of the combined value.
The business, its goodwill, stock and plant are not the security, and neither is the sale contract. The sale is how your company plans to repay, which is why we will want to see where the sale is up to and when it is expected to settle. Terms run from 1 to 24 months, so the term can be chosen to cover the time to your expected settlement date.
If a garnishee notice or a director penalty notice is already running, our page on paying an ATO debt before a garnishee, director penalty notice or wind-up deadline covers that timetable.
What paying the ATO before settlement changes
| ATO step | If the ATO is paid at settlement | If the ATO is paid now |
|---|---|---|
| General interest charge | Accrues daily on the balance until settlement, and is not tax deductible | Stops accruing on the balance that is paid |
| Director penalty notice | Can still be issued while the sale runs | The company's unpaid amounts are paid |
| Garnishee notice | Can direct the purchaser, solicitor or agent to pay the ATO from the surplus | No ATO balance for a notice to collect |
| Withheld clearance certificate amount | Refunded in full only where there are no tax debts and no capital gains tax payable | The tax debt that would stop a full refund has been paid |
Whether borrowing to pay the ATO suits your company, and the goods and services tax and capital gains tax treatment of the sale, are questions for your accountant. We are a lender, and we do not give tax, legal or insolvency advice. If your company may not be able to pay all of its debts, speak to an insolvency practitioner before paying any creditor.
Selling the premises with the business: the clearance certificate
If your company is selling real property with the business, such as the commercial property it trades from, the clearance certificate rules apply. The ATO's page on Australian residents and clearance certificates states the rule:
"All Australian residents (for tax purposes) selling or disposing of Australian real property (property) must have a clearance certificate and give it to the purchaser at, or before settlement."
Without one, the purchaser must withhold an amount from the price and pay it to the ATO. Under the foreign resident capital gains withholding rules, the rate is 15% of the value of all property from 1 January 2025.
Applications are free, can take up to 28 days to process, and the certificate is valid for 12 months. The ATO says to apply as soon as you are thinking of selling, and that processing may take longer if the vendor has not lodged income tax returns recently. If an amount is withheld, the vendor claims it back through a tax return, which may be months after settlement.
The ATO's list of taxable Australian real property also includes a lease over real property in Australia. Whether the transfer of your business's lease needs a clearance certificate is a question for your solicitor.
Case study: $1.15 million to pay an ATO debt in 4 business days
A pub operator in Melbourne's inner south needed to pay an outstanding ATO debt urgently. A bank had issued a letter of offer, but it could not settle in time to meet the ATO payment.
The borrower offered an investment property in Prahran, valued at approximately $2 million, as security. We lent $1,150,000 on a first mortgage over that investment property at a loan-to-value ratio of approximately 58%, and the loan settled within 4 business days.
The exit was the bank refinance, on a three-month minimum term, and the loan was repaid in full during the second month.
Frequently asked questions
Can the ATO take the sale money before my company receives it?
Yes, it can. In a property sale, the ATO can issue a garnishee notice to the solicitor, the purchaser or the agent, and it takes the surplus after secured creditors are paid. Paying the ATO in full before settlement leaves no ATO balance for a notice to collect.
Will the ATO wait now that my company has a signed contract?
A signed contract does not stop the general interest charge, and it does not stop the ATO from issuing a director penalty notice or a garnishee notice. The ATO can still take either step until the debt is paid.
Do we need a clearance certificate if the premises are sold with the business?
Yes. Every Australian resident vendor selling real property needs a clearance certificate at or before settlement, or the purchaser must withhold 15% of the price. Apply early, because processing can take up to 28 days.
Can one loan pay income tax, activity statement debts and superannuation guarantee charge together?
Yes. One loan can cover all of them, so your company pays the ATO in full in one payment.
Who is the borrower?
The borrower is always a company, which can include a company acting as trustee. We lend to companies, not to individuals or sole traders, and a director's home or investment property can back a loan made to the company.
How Secured Lending Can Help
We would be glad to help your company clear its ATO debt now, rather than on the day the business sale settles. Our bridging loan gives your company the funds to pay the ATO in full, secured by a first or second mortgage over residential, commercial or industrial property. The general interest charge stops on the balance that is paid, there is nothing left for a garnishee notice to take from the sale proceeds, and your company repays us through the exit agreed before settlement.
A private loan suits this problem because it is quick and because the loan is secured against property. We lend our own funds and our in-house team values the property, so nothing waits on an outside valuer or another funder. In most cases we decide within hours, we issue a letter of offer as soon as terms are agreed, and we can settle within 24 hours. Our tax debt loans start from 9.7% p.a.
We provide secured loans backed by real property. If you would like us to look at your situation, it helps to have these to hand:
- •The sale contract, or where the sale is up to, and the expected settlement date.
- •The ATO balance and any ATO letters or notices, with their dates.
- •The property that could back the loan, its estimated value and any existing loan on it.
You are welcome to call us on 1300 795 175 to talk it through, or send the details through and we will come back to you. In most cases, we can tell you within hours whether we can help.
