Rolling ATO debt into your home loan can be one of the smartest financial resets a business owner can make, because it gets you off the ATO's payment plan, which is usually structured to be repaid within just one to two years at an interest rate of around 11.5 percent, interest that, as of the 1st of July 2025, is no longer tax deductible. Using the equity in your property to clear that debt instead can provide a meaningful improvement to your business's cash flow, save you thousands of dollars in interest over the life of the loan, and give you genuine breathing space to actually run your business again instead of constantly managing a tax debt in the background.
Here are the five things worth getting right before you go ahead.
1. Don't rely on your bank, get a specialist involved
If you walk into your own bank, or any major bank for that matter, and ask them to help you consolidate ATO debt into your home loan, there's a good chance they'll turn you away and tell you to come back once your tax portals are clear. This isn't a gap in their service, it's simply not within the risk appetite of major banks, which is why this is genuinely specialist territory. A lot of the business owners we work with on this have already been declined once, sometimes more than once, after approaching their bank directly first. Each of those declines adds another credit inquiry to their file, which costs them time they didn't have to lose, and only makes their situation worse.
2. Understand your exit strategy before you consolidate
Consolidating your tax debt doesn't make the debt disappear. It restructures it into a cheaper loan product with lower monthly repayments and a cheaper interest rate. But the underlying debt is still there, and it still has to be repaid in full. This is important because tax debt consolidation only makes sense as a reset if your business has been through a tough period and has now turned a corner and you can see it improving from here, or you're still in a tough period but you can see light at the end of the tunnel and business performance will pick up, especially once the tax debt issue is no longer lingering.
When does tax debt consolidation make sense?
Your business has been through a rough patch, whether that's a slow season, a client who paid late, or an unexpected cost, and it has genuinely turned a corner, or you can already see the light at the end of the tunnel. Consolidating gives you the clean slate to build on that.
When does tax debt consolidation not make sense?
You don't see your business performance meaningfully improving, and you don't see yourself being operational in the near future. In that case, restructuring the debt into your mortgage risks just prolonging the pain rather than actually solving anything, and it's worth having an honest conversation about whether a different path makes more sense for your situation.
3. Keep the tax debt on its own loan split
Say you owe $600,000 on your existing mortgage and you want to use $200,000 of equity to clear your ATO debt. It's tempting to just increase your loan to $800,000 and move on, but it's worth resisting that instinct and creating a brand new $200,000 split specifically for the tax debt instead, sitting alongside your original $600,000 split rather than blended into it. Keeping it separate means the debt stays visible as its own specific, trackable goal that you can actively pay down, rather than disappearing into a much larger balance you're not really thinking about day to day, and it also means a lender or your accountant can trace exactly what that portion of the loan was used for, which matters if deductibility ever comes into the conversation.
4. Don't take 30 years to pay it off
A typical ATO payment plan is usually structured to clear a debt within one to two years, but roll that same amount into a 30 year mortgage and, even at a dramatically lower interest rate, you can end up paying more in total interest over the life of the loan if you just let it sit at the minimum repayment. The way around this is to treat that separate split as its own short term goal and direct whatever extra cash flow you can toward it over the next couple of years, roughly the same window your ATO payment plan would have run for, so you get the benefit of the lower rate without accidentally stretching the debt out over decades.
5. Fix what actually caused it, not just the symptom
Consolidating clears the debt, but it doesn't fix whatever caused it to build up in the first place, and that's worth being honest with yourself about before you go ahead. If the debt came from a genuine one off event, a bad year, a client who paid late, an unexpected assessment, then consolidating is a clean reset and that's the end of it. But if it built up because tax simply wasn't being set aside consistently, putting a proper system in place going forward matters just as much as clearing the current balance, whether that's putting money aside for your quarterly BAS as it comes in, setting aside a percentage of income for tax specifically, or working more closely with your accountant throughout the year rather than just at tax time.
How we help
We know which lenders on our panel genuinely have appetite for tax debt consolidation, and which ones don't, so you're not adding another decline to your file by applying with someone who was never going to approve it in the first place. We'll also have an honest conversation with you about whether this is genuinely the right time for your business, whether the split can be structured with deductibility in mind, and what's actually changed to stop the same debt building up again, because getting you approved is only half the job, making sure you're actually better off doing it is the part that matters most.
This page provides general information only and does not take into account your personal financial situation. It is not tax, legal, or financial advice. Always seek advice from a qualified accountant or tax professional about your specific circumstances, particularly around deductibility and director penalty notices.
Useful tools and resources
For current ATO general interest charge rates, see the ATO's GIC rates page. To set up or review a payment plan directly, see the ATO's payment arrangements page.
Explore our Tax Debt Consolidation service, or read our complete guide on how the consolidation process actually works step by step.
