How lenders view a tax debt
- On a payment plan and up to date: lenders count the plan repayments in your budget. Many will lend.
- No plan, or plan in default: much harder. Most lenders want the debt cleared at settlement.
- Overdue tax returns: often the bigger problem, because the lender can't verify income. A low doc loan may help.
- Business tax debt reported to credit bureaus: the ATO can report certain business tax debts. Lenders will see it, so disclose it up front.
Refinancing to pay off an ATO debt
If you own a home with equity, a refinance can pay the ATO directly at settlement. Specialist lenders do this regularly for self-employed borrowers, often using BAS or bank statements to verify income where tax returns are behind.
The question every lender will ask: why did the debt build up, and what's stopping it happening again? A new bookkeeper, a separate tax account or a change in business structure are good answers.
Buying a home with a tax debt
Buying is possible if the debt is modest, on a plan and the repayments fit your budget. A larger debt may need to be cleared first, or as part of the purchase where the lender agrees.
A worked example
A café owner owes the ATO a sizeable amount in GST and income tax after a tough year, on a payment plan that's eating into cash flow. He owns his home with good equity.
A specialist lender refinances, paying the ATO in full at settlement. His single home loan repayment is lower than his old mortgage plus the ATO plan combined, the general interest charge stops, and the business has breathing room.
Get your ATO paperwork ready
- A current statement of account from the ATO or your tax agent.
- Details of any payment plan, including the amount and frequency.
- Proof that lodgements are up to date, or a plan for any outstanding ones.
- BAS and business bank statements if you're self-employed.
Director penalty notices
Company directors who receive a director penalty notice can become personally liable for certain company tax debts. If you've received one, act fast: get advice from your accountant or a solicitor about your options, and talk to us early if a refinance could help meet the debt.
What you’ll need
- Photo ID
- ATO statement of account
- Payment plan details
- BAS or tax returns
- Business and personal bank statements
- Current loan statements if refinancing
Who it usually suits
- Homeowner or buyer with a deposit
- Tax debt on a plan or able to be paid at settlement
- Income that supports the loan
- Lodgements up to date or close to it
