For many small and medium sized businesses, the temptation to use the ATO as a bank is high. Aside from not having to deal with everchanging relationship managers, the ATO will often be able to provide a cheaper source of funding that is available from mainstream lenders on an unsecured basis. Nevertheless, this approach is not without its downside that should be known before going down this path.

How does the ATO become a lender?

Business has regular payment obligations to the ATO that can often be ignored for a period of time or not met due to short term cash flow constraints. In these instances, businesses will often seek a payment plan from the ATO to pay off these amounts over a specified period of time, typically up to 3 years with monthly payments and interest rate applied to the outstanding amount. The features of an ATO payment plan therefore mirrors the profile of an amortising loan with a bank.

What are the benefits of an ATO payment plan?

The benefits of an ATO payment plan for businesses that are experiencing cash flow contraints is clear. For these businesses that can't meet their obligations or access additional capital, a payment plan effectively provides them with a loan to enable the business to meet their obligations to the ATO. The interest rates are often better than what would be available to these businesses on an unsecured basis from mainstream lenders. 

What is the downside of an ATO payment plan?

The key downside of an ATO payment plan is the restricted access to debt facilities from mainstream lenders. As the ATO assumes a priority position over the company whilst the payment plan remains in place, lenders automatically become subordinated to the ATO. For this reason alone, access to new debt facilities from mainstream lenders becomes significantly restricted if not completely ruled out whilst the ATO liability remains in place. 

Fortunately, access to funding is not so restrictive for businesses with a payment plan when seeking a facility from a non-bank lender. Many of these lenders will be able to provide a facility regardless of an ATO payment plan and in many cases, these facilities can be used to repay an ATO facility before applying for more cheaper forms of finance through the mainstream lenders.


An ATO payment plan and using the ATO as a bank can sometimes be an effective source of funding for businesses that don't otherwise have access to capital or only have access to more expensive capital. Nevertheless, businesses that may be seeking a loan facility with a mainstream lender over the near to medium term should try to avoid such arrangements to maximise their chance of approval.


CreditSME is a business loan specialist helping businesses access debt funding from bank and non-bank lenders on the most competitive terms. Give us a call (1300 001 567) for a confidential discussion on your businesses funding requirements and what loan options are available to your business.