How to pay your ATO tax bill when cash flow is tight
By PayMyTax · · 6 min read
The short answer
A tax bill landing in a tight month is a timing problem, not a crisis, as long as you act before the due date. Your realistic options are paying part of the bill now, asking the ATO for a payment plan, freeing up cash by chasing invoices and adjusting spending, or financing the bill so the ATO is paid in full and you repay over time. Each has a different cost, and the cheapest one depends on how long you need and what the interest does after tax.
First, work out what you actually owe and when
Before choosing an option, check the numbers on the statement itself: the amount due, the due date and the payment reference. A BAS or IAS that looks unpayable sometimes contains figures you can adjust, such as corrections your accountant can claim, so it is worth a quick review. Knowing the real gap and the real deadline turns a vague worry into a decision you can make on facts.
Option 1: pay what you can, when you can
Paying part of the bill before the due date is always better than paying nothing. The general interest charge (GIC) only accrues on the unpaid balance, so every dollar you pay now stops compounding. If your cash flow is tight rather than empty, paying a meaningful slice can shrink the problem while you work out the rest.
Option 2: an ATO payment plan
The ATO offers payment plans for businesses that cannot pay in full by the due date. Smaller debts can often be arranged online, and larger ones usually need details about your business and its capacity to pay. It is a legitimate option, and for a small shortfall you expect to clear within weeks it can be the simplest path. Be clear-eyed about the trade-offs: GIC keeps accruing on the unpaid balance and compounds daily, from 1 July 2025 that interest is no longer tax-deductible, your lodgments generally need to be up to date, and missing an instalment can see the plan cancelled with the full debt falling due.
Option 3: free up cash inside the business
- Chase outstanding customer invoices, and offer early-payment discounts where a large invoice is at stake.
- Review upcoming expenses and delay anything that is not urgent until after the due date.
- Check whether any tax credits, refunds or supplier credits are owed to you and can be collected quickly.
- Ask your accountant whether any figures on the statement can legitimately be adjusted before you pay.
These steps cost nothing, so they are worth doing regardless of which option you pick. They may not close the gap on their own, but they can shrink it.
Option 4: finance the bill and pay the ATO in full
Business finance, such as an unsecured loan, lets you pay the ATO in full on the due date and repay the lender over weekly, fortnightly or monthly instalments. The ATO account is cleared immediately, so no GIC accrues and nothing is reported as overdue. The interest on a loan used for a business purpose is generally tax-deductible, while GIC is not, which narrows the real cost gap more than most owners expect. The trade-offs are honest too: finance costs money, approval takes a little time, and you take on a repayment commitment alongside your other bills.
What to avoid when cash flow is tight
- Doing nothing. The GIC compounds daily, penalties can apply, and larger overdue business debts can be reported to credit agencies.
- Relying on a credit card. The ATO stops accepting credit card payments from 30 November 2026, and even before that, card rates were rarely the cheapest way to carry a tax bill.
- Treating a tax debt as routine funding. Leaving bills with the ATO quarter after quarter gets more expensive and can affect your credit record and future borrowing.
- Borrowing against assets for a short-term bill. Pledging property or equipment over a BAS payment is usually a poor match for a short-term need.
Questions to ask before you choose
- How big is the gap, and how quickly can my cash flow realistically cover it?
- What does each option cost me after tax, given GIC is no longer deductible and loan interest generally is?
- Do I want the ATO debt gone, or am I comfortable owing the ATO while I catch up?
- Will this quarter repeat next quarter, or is this a one-off shortfall?
Where PayMyTax fits, if it fits
PayMyTax is one way to take option 4. You upload your BAS or IAS statement on the Customer Portal, choose how much to pay now via BPAY directly to the ATO and how much to defer (from $5,000), and the loan provider pays the ATO directly at settlement. The loans are unsecured, so nothing of yours is pledged as security. If you want to compare it with the other options, the payment calculator on our home page shows indicative repayments at a 15.95% rate, and our articles on ATO payment plans and secured vs unsecured loans cover the alternatives in depth. Your accountant can also help you weigh the decision for your situation.
Whichever route you take, act before the due date. The businesses that fare best in a tight quarter are the ones that pick an option early, rather than letting the interest decide for them.
Common questions
- What can I do if I can't afford to pay my BAS?
- Pay what you can now, look for an ATO payment plan, free up cash from invoices and expenses, or finance the bill so the ATO is paid in full and you repay a lender over time. Acting before the due date keeps every option open.
- Is an ATO payment plan free?
- There is no setup fee, but the general interest charge accrues on the unpaid balance and compounds daily for the life of the plan. From 1 July 2025 that interest is no longer tax-deductible.
- Is it better to owe the ATO or a lender?
- It depends on cost and how long you need. A lender charges fixed interest that is generally tax-deductible for business borrowing, while the ATO charges GIC that compounds daily and is no longer deductible. Compare the total cost over the time you need.
- Can I pay part of my tax bill now and the rest later?
- Yes. GIC only accrues on the unpaid balance, so paying part now reduces the interest that builds up. You can then handle the remainder through a payment plan or business finance.
- Will a tax loan affect my credit record?
- Taking a loan and repaying it on time is normal credit activity. Missing repayments affects your credit record, just as an overdue ATO debt above certain thresholds can be reported to credit agencies.
Pay your tax now, repay over time
Upload your BAS or IAS statement and choose how much to pay now and how much to defer.
General information only. This article does not take your personal circumstances into account and is not tax, financial or legal advice. Speak with your accountant or tax adviser before acting. PayMyTax is operated by Tax Hitech Pty Ltd ABN 38 642 032 666 and is not a lender. See also our ATO payment plans guide.