Key takeaways
- •The business loan terms we read from National Australia Bank and the Commonwealth Bank have no clause that names Australian Taxation Office (ATO) debts. An ATO debt can still affect your loan through their general clauses.
- •An ATO debt can affect a bank loan through three general clauses in National Australia Bank's terms: the promises you repeat each time you use the loan, the bank's review of your finances at least once a year, and default events such as another creditor's enforcement action.
- •For a small business under the Banking Code of Practice, a default other than a missed payment must be one of the Code's listed events, and the bank must generally give you at least 30 days to fix it.
- •Your bank can learn about your ATO debt from the ATO itself, through a garnishee notice sent to the bank that holds your accounts, or through a listing of the debt with credit reporting bureaus.
- •Paying your ATO debt in full removes any credit reporting bureau listing for that debt, and leaves no overdue ATO balance for a garnishee notice to collect or for your bank's review to find.
- •A short-term private loan from Secured Lending, from $250,000 and backed by real property, gives your business the funds to pay the ATO in full, and we can settle within 24 hours.
If your business has a bank loan and owes the Australian Taxation Office, you may be wondering whether your loan agreement says you have to tell the bank. In the standard business lending terms we read from National Australia Bank and Commonwealth Bank, there is no clause that mentions the ATO by name. An ATO debt can still become the bank's business, through the promises the agreement asks you to give, the bank's regular review of your finances, and the events the agreement treats as a default.
We would be glad to help you deal with the debt itself. If your business or a director owns property, a short-term private loan backed by that property is a good fit, because it gives your business the funds to pay the ATO in full before the bank's next review or the ATO's next step. We lend our own funds, in most cases we decide within hours, and we can settle within 24 hours. The loan funds are paid to your business, which pays the ATO, and your business then repays us through a defined exit, such as a bank refinance or the sale of a property.
Whether to tell your bank, what to tell it and when is a question for your lawyer, who should read your own loan agreement, because terms differ between banks and between facilities. We are a lender, and we do not give legal or tax advice.
Where an ATO debt meets a bank loan agreement
We read two sets of standard terms: National Australia Bank's Business Lending General Terms, effective 10 November 2025, and the Commonwealth Bank's Current Terms and Conditions for Business Finance, issued 23 May 2025. Neither has a clause about tax debts on their own. Three kinds of general clause can still apply to one.
1. The promises you repeat while using the facility
National Australia Bank's terms set out promises the bank relies on, and say they are given when the documents are signed "and again while using a Facility." Among them are promises that you have not withheld information that might reasonably be expected to affect the bank's decision to provide a facility, and that you have told the bank about all defaults you are aware of. Because the promises repeat, they apply every time the business draws on the facility, not only on the day the loan was signed.
2. The bank's review of your finances
The same terms let the bank review your financial position periodically, and at least annually. The examples of what it may ask for at a review include financial records that let it understand your debtors, your creditors and your taxation liabilities. An ATO balance will normally appear in the accounts your accountant prepares for that review.
3. Events the agreement treats as a default
A default is not only a missed repayment. The list of adverse events in National Australia Bank's terms includes enforcement proceedings taken against the business or its assets by another creditor, the bank believing on reasonable grounds that the business has not complied with the law or a requirement of a statutory authority, and information given to the bank that is materially incorrect or misleading, including by omission. Its definition of insolvent includes a company that is taken under section 459F of the Corporations Act to have failed to comply with a statutory demand.
The Commonwealth Bank's terms carry similar events, and they spell out who can give the bank misleading information. Clause A7.2(f) covers information from "you or a Guarantor (or someone acting on your behalf or on behalf of a Guarantor, for example your or a Guarantor’s accountant)" that is materially incorrect or misleading, including by omission, and that materially increases the bank's risk. That is worth your accountant knowing before they send the year-end accounts.
The ATO can take some of these steps itself. Its page on legal action it may take explains that it can file a claim in court, and can serve a company with a statutory demand that requires it to pay the entire debt or enter a payment plan within 21 days.
What the Banking Code of Practice limits for a small business
If your bank subscribes to the Banking Code of Practice, its small business lending rules apply where your business, together with its related group, had turnover of less than $10 million in the previous financial year, has fewer than 100 full-time equivalent employees, and has less than $5 million in total debt to all credit providers, counting undrawn amounts and any loan being applied for.
For those businesses, the Code limits what the bank can do over a default that is not a missed payment:
- •The default must be one of the events listed in paragraph 87, which include another creditor bringing enforcement proceedings, not complying with the law or a requirement of a statutory authority, and materially incorrect or misleading information.
- •The event must be material by its nature, or the bank must reasonably consider it has had or is likely to have a material impact on your ability to meet your obligations to the bank, on the bank's security risk, or, for some events, on its legal or reputation risk (paragraph 90).
- •The bank must give you a notice of the grounds and at least 30 days to fix the default where it can be fixed (paragraph 88), unless paragraph 89 allows a shorter period, for example where you are insolvent or the bank needs to manage a material and immediate risk.
- •A standard form small business loan cannot include a default based on unspecified material adverse changes (paragraph 92).
The Code defines enforcement proceedings to include starting court proceedings to recover a debt. National Australia Bank's terms also contain their own definition of a small business, based on total business lending from National Australia Bank to you and your related entities of less than $5,000,000, so your lawyer should check both.
How the bank can hear about the debt from the ATO
You may not be the first to tell the bank. The ATO's page on garnishee notices lists banks or financial institutions that hold your accounts among the third parties it can send a notice to, and the recipient is legally required to follow it. The ATO sends a warning letter before it issues one.
The ATO can also report a business tax debt to credit reporting bureaus, including Equifax, Experian and CreditorWatch, where at least $100,000 is overdue by more than 90 days and the business is not engaging with the ATO to manage it. Under its rules on the disclosure of business tax debts, the ATO sends a notice first and gives you 28 days from receiving it to act, and the listing is removed once you pay the debt in full or engage with the ATO to manage it. Our article on how a tax debt affects your credit score covers credit reports in more detail.
Paying the ATO in full before the bank's review
A payment plan with the ATO leaves the balance owing on the ATO account while it is paid off. Asking the bank for a larger facility means a new application. A short-term private loan gives your business the funds to pay the whole ATO balance now, so the ATO accounts show no overdue amount when the bank's review arrives.
Our tax debt loans work this way. Your business is the borrower. At settlement the loan funds are paid to your business, which pays the ATO in full itself. 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 statutory demand has arrived. A live ATO tax debt listing on its own is not a reason we decline.
| Loan feature | Detail |
|---|---|
| Borrower | Your business, a company including a company acting as trustee |
| Loan size | From $250,000, with larger loans assessed case by case |
| Interest rate | Tax debt loans from 9.7% p.a. |
| Term | 1 to 24 months, typically 3 to 6 months |
| Security | A mortgage over residential, commercial or industrial property owned by the business, a director, or an existing company or trust |
| Maximum loan-to-value ratio | 70% of the property's value, including any existing loan on it. A second property can be added within the same 70% |
| Repayment | Your business repays us through a defined exit, such as a bank refinance once the ATO accounts are clear, or the sale of a property |
Once the ATO is paid, the records the bank sees change with it. The ATO accounts show no overdue balance, a credit bureau listing for the debt is removed, and there is no overdue amount left for a garnishee notice to collect. Our loan will appear in the business's accounts as a liability, with a set term and a stated plan to repay it, and the bank will see it at its review like any other debt.
If a garnishee notice, a statutory demand or a wind-up application is already running, our page on a short term loan to pay an ATO debt before a garnishee, director penalty notice or wind-up deadline covers that timetable.
If the ATO asks for security for a payment plan
Where the ATO and a business cannot agree how a debt will be paid, the ATO may consider accepting security for a deferral or an instalment plan. Its page on alternative payment plans names a registered mortgage over freehold property and an unconditional bank guarantee from an Australian bank as its preferred securities. If the property in question is already security for your bank loan, ask your lawyer to read your loan agreement before you offer it. A private loan that pays the ATO in full means the ATO has no balance left to secure.
Frequently asked questions
Do I have to tell my bank I owe the ATO?
It depends on your loan agreement, and your lawyer should read it. The National Australia Bank and Commonwealth Bank terms we read have no clause about tax debts by name, but their promises, review clauses and default events can still apply to an ATO debt.
Can the bank call in my loan because of an ATO debt?
For a small business under the Banking Code of Practice, a default that is not a missed payment must be one of the listed events and must be material, and the bank must generally give you at least 30 days to fix it. Court proceedings by the ATO to recover a debt fall within the Code's definition of enforcement proceedings, and your lawyer can tell you whether any listed event applies to your business.
Will the bank find out about the ATO debt anyway?
It may. The ATO can send a garnishee notice to the bank that holds your accounts, and it can list an overdue business tax debt of $100,000 or more with credit reporting bureaus. The debt will also appear in the accounts the bank reviews.
Can I borrow against property to pay the ATO while I have a bank loan?
Yes. Our loan is made to your business and backed by real property, within a 70% maximum loan-to-value ratio including any existing loan on the property. Your lawyer should check your bank loan agreement before the loan is arranged.
How Secured Lending Can Help
If your business owes the ATO and your bank's review is coming up, we would be glad to help you clear the debt first. Our loan gives your business the funds to pay the ATO in full, secured by a mortgage over a property your business, a director or an existing company or trust owns. Your business then repays us through a defined exit, such as a refinance with its bank once the ATO accounts are clear, or the sale of a property.
A private loan suits this problem because the bank's review date and the ATO's deadlines do not move. 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.
We provide secured loans backed by real property. If you would like us to look at your business's ATO debt, it helps to have these to hand:
- •The ATO statement of account and any ATO letters or notices, with their dates.
- •The date of your bank's review, or of any application you plan to make.
- •The property that could back the loan, its estimated value and any existing loan on it.
- •How your business plans to repay the loan, and roughly when.
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.
