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Small business guide

Can't pay the ATO? What to do about a tax debt (2026)

Updated 3 October 2026. From the ATO, ASIC and business.gov.au, linked at the end. General information only, not advice for your business.

By Nicholas Reid, Founder, FIZO

How this guide is written: facts only from the named public sources below. FIZO does not give financial advice.

The short answer

Lodge on time anyway, and contact the ATO before the due date1. If you owe $200,000 or less you may be able to set up a payment plan yourself online2. Interest on unpaid tax is 11.51% a year for October to December 20263, and it is no longer tax deductible4.

What to do, in order

  1. Lodge on time, even if you cannot pay. Not lodging adds its own penalties and hides the real size of the debt1.
  2. Contact the ATO before the due date, or have your registered tax agent do it for you16.
  3. Set up a payment plan. If you owe $200,000 or less you may be able to do it through online services or the ATO's self-help phone line. Over that, you call the ATO2.
  4. Keep up with new lodgments and payments while the plan runs.

Good to know: Income tax debts and activity statement debts need separate payment plans2.

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What waiting costs

The general interest charge (GIC) is worked out daily and compounds. Since 1 July 2025, GIC and shortfall interest charges can no longer be claimed as a tax deduction4.

PeriodGeneral interest charge
July to September 202611.43% a year3
October to December 202611.51% a year3

If you are a company director

For unpaid company PAYG withholding, GST and super guarantee charge, the ATO can make directors personally liable. It must first issue a director penalty notice, and can start recovering 21 days after it does5.

If the company cannot pay its debts, read when to talk to an insolvency practitioner.

Who can deal with the ATO for you

A registered tax agent or BAS agent can deal with the ATO on your behalf6. Agents can see your account, talk to the ATO directly and often know which options apply.

Who can help

Tax agentsDeal with the ATO and set up the plan for youAccountantsLook at cash flow and what caused the debtInsolvency & bankruptcyIf debts are more than the business can pay

Questions people ask

Can I set up an ATO payment plan online?

If you owe $200,000 or less, you may be able to set one up through online services or the self-help phone line2.

What interest does the ATO charge on unpaid tax?

The general interest charge is 11.51% a year for October to December 20263.

Is ATO interest tax deductible?

Not any more. GIC and SIC incurred on or after 1 July 2025 cannot be claimed as a deduction4.

What is a director penalty notice?

A notice the ATO must issue before it can recover certain unpaid company tax and super debts from directors personally. It can recover 21 days after issuing it5.

Talk it through with a professional

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Sources

  1. ATO, What if you can't lodge and pay on time
  2. ATO, Setting up a payment plan
  3. ATO, General interest charge rates
  4. ATO, General interest charge
  5. ATO, Director penalty regime
  6. Tax Practitioners Board, Finding and using a tax practitioner

FIZO is a directory, not a tax or legal adviser. Rules and thresholds change: check the source, or ask a registered professional about your own business.