Last updated: August 19, 2026
The short answer
If your business has fallen behind on ATO payments and you own a property with equity, a ‘reset loan’ may be worth exploring. The idea is to use the equity in a property to clear or consolidate the outstanding ATO debt through a specialist lender. That relieves the immediate cash-flow pressure, stops the ATO interest charge accruing on the debt (which is no longer tax deductible from 1 July 2025), and buys the business time to get back on track. The plan from day one is to refinance back to a mainstream lender in approximately 18 months once the business’s trading position has stabilised. It’s not the right answer for every business, and securing debt against a property comes with real risks. This post walks through how it works, who it suits, and when it doesn’t.
If you’d like to talk through your specific situation confidentially, book a free 15-minute call and we’ll walk through it with you.
A quick word before we get into the detail
This isn’t a topic I’d normally write about at length, because it sits outside our usual home loan work. But over the past six to twelve months we’ve had a noticeable uptick in Sunshine Coast business owners walking through our door with the same problem: profitable business, pressure from the ATO, and no clear picture of what their options actually are. Enough of them that I thought it was worth putting the detail in one place clearly, so anyone in this situation can see whether it might apply to them.
A few things I want to say up front. First, this post is not financial advice and it’s not a substitute for talking to your accountant. It’s a plain-English explainer of one specific type of finance solution. Second, if you’re reading this and you’re feeling stressed, you’re not alone. As at 30 June 2025 there were over 1.3 million Australian small businesses carrying collectable ATO debt. This is a genuinely common situation. Third, whatever you decide, dealing with it early gives you more options than waiting for the ATO to escalate.
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What’s happening with the ATO right now
A few pieces of context are worth understanding before we get into the mechanics.
The scale of the problem
As at 30 June 2025, Australian small businesses collectively owed $35.9 billion in ATO collectable debt. That’s approximately 66.1 percent of the ATO’s total $54.2 billion in collectable debt (source: ANAO Auditor-General Report No. 45 of 2025-26). Small businesses currently carry the majority of Australia’s tax debt, and the ANAO has recommended the ATO set formal targets to reduce it.
The ATO’s approach has firmed up
The ATO has publicly stated it is taking a firmer, faster approach to recovery, particularly for taxpayers who don’t engage on priority debts (Superannuation Guarantee Charge, PAYG withholding, GST). In 2024-25, the ATO issued 84,529 Director Penalty Notices to individual directors covering $5.5 billion in liabilities. If you’re a director of a company with ATO debt, this is relevant to you personally, not just to the business.
ATO debt got more expensive on 1 July 2025
The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 changed the rules on ATO interest charges. From 1 July 2025, General Interest Charge (GIC) and Shortfall Interest Charge (SIC) incurred on ATO debt is no longer tax deductible, regardless of whether the debt relates to an earlier income year. The GIC rate is currently 11.17 percent and compounds daily. Previously, that interest was tax deductible, which meant the effective after-tax cost was much lower. Under the new rules, the full 11.17 percent bites.
For a business carrying $100,000 of ATO debt, that’s approximately $11,170 a year in non-deductible interest. That’s significantly more than most business loans and materially more than most home loans. It’s now one of the most expensive forms of finance in the market.
What is a reset loan?
A reset loan is our term for a specific finance strategy: use the equity in a property (usually the business owner’s home) to clear or consolidate the outstanding ATO debt through a specialist lender, then set a plan to refinance back to a mainstream lender in approximately 18 months once the business is trading strongly again.
The specialist lender component is important. Most mainstream banks won’t lend against a property specifically to clear ATO debt while the debt is still active. Specialist lenders (also called alternative or non-bank lenders) exist to fill this gap. They typically:
- Assess the situation on merit, including the business’s actual trading position and cash flow, not just the tax return snapshot
- Charge higher interest rates than mainstream lenders (typically 1.5 to 3 percent above the market’s best)
- Accept the fact that ATO debt is currently outstanding as part of the picture
- Understand that the loan is designed to be short to medium term, not a 25 year mortgage
The higher rate is a real cost. It’s worth doing anyway when the alternative is 11.17 percent non-deductible ATO interest plus escalating recovery action, but it has to be modelled honestly rather than glossed over.
Who does a reset loan suit?
For a reset loan to be worth considering, three things generally need to be true:
- You own a property with sufficient equity. Usually the family home, sometimes a business property or investment. The available equity needs to be enough to cover the ATO debt plus the loan setup costs, while leaving the total lending inside the specialist lender’s LVR limits (typically 70 to 80 percent).
- You have outstanding ATO debt. Whether that’s income tax, GST, PAYG withholding, superannuation guarantee charge, or a combination. Typically the debt is at least $30,000 to make the exercise economic, and often significantly more.
- Your business is still trading profitably. This is the piece that makes the plan work. The business needs to have current or near-term profitability that will service the specialist loan while it’s in place, and that will support refinancing back to a mainstream lender in about 18 months. If the business is fundamentally not profitable, adding property-secured debt on top of ATO debt makes the situation worse, not better.
How the reset loan process actually works
- Initial confidential conversation. Free 15-minute call to understand the situation, the ATO debt position, the property equity available, and the business’s current trading picture.
- Coordinate with your accountant. This step is non-negotiable. Your accountant needs to confirm the ATO debt figures, provide the current trading data, and be part of the conversation about whether a reset makes sense. We work alongside your accountant, not around them.
- Model the numbers honestly. What the specialist loan looks like (rate, fees, monthly serviceability), what the ATO debt costs you if you keep carrying it, and what the total position looks like over 18 months. If the maths doesn’t stack, we tell you.
- Identify the right specialist lender. Different specialist lenders have different appetites for different business types and different debt profiles. We access several through our aggregator panel.
- Application and approval. Typically 3 to 6 weeks depending on the lender and the complexity of the situation. Documentation is heavier than a standard home loan because the specialist lender is assessing the business trading position as well as the property security.
- Settlement and ATO debt paid out. Funds are typically paid directly to the ATO on settlement, not through your business account, which keeps the paper trail clean.
- The 18-month plan begins. From day one, we set the plan to refinance back to a mainstream lender once the business has traded strongly for 18 months and the ATO position is fully clear still.
The 18-month refi plan is the whole point
A reset loan without an exit plan is just an expensive loan. The whole strategy is built around the exit. Roughly 18 months after the reset settles, we come back to the situation with a specific goal: refinance the specialist loan into a mainstream bank product, at mainstream bank rates, on mainstream bank terms.
Three things typically need to have happened for the refinance back to succeed:
- The business has 12 to 18 months of clean trading with the ATO up to date
- Two full tax returns showing consistent profitability (or comparable evidence for specialist assessment)
- The property’s equity position remains solid (in most cases this happens naturally as the loan is paid down and property values move)
When we set up the reset loan, we’re already planning for this exit. The loan structure, the term, and the specialist lender chosen all factor in the refinance-back timeline.
The risks and tradeoffs (this is the important section)
Securing debt against a property, particularly the family home, is not a small decision. Here are the risks worth understanding honestly.
Risk 1: The rate is higher than a mainstream loan
Specialist lenders charge more. The interest rate on a reset loan is typically 1.5 to 3 percent above what a mainstream bank would offer for a comparable loan. Over 18 months on a $200,000 loan, that’s roughly $7,000 to $14,000 in additional interest compared to a mainstream loan. In many cases it’s still cheaper than carrying the ATO debt at 11.17 percent non-deductible, but the maths needs to be run properly.
Risk 2: If the business doesn’t recover, the debt is now secured against your home
This is the fundamental risk. ATO debt is a serious problem, but it’s not secured against your family home. A reset loan converts unsecured business tax debt into secured personal property debt. If the business subsequently fails, the specialist lender has a mortgage over the property. This is why the third criterion (business trading profitably) is so important.
Risk 3: If the refinance back doesn’t happen in 18 months, the higher rate keeps applying
The 18-month refi plan depends on the business trading well and the numbers looking clean. If that doesn’t happen, the specialist loan continues at the higher rate. We build in longer-term modelling for this scenario, but it needs to be understood upfront.
Risk 4: The reset loan doesn’t fix the underlying business problem
A reset loan buys time. It doesn’t fix cash-flow management, underquoting, poor payment terms, or any of the operational issues that led to the ATO debt in the first place. If those problems continue after the reset, the ATO debt returns and the business is back where it started, but now with additional secured debt against the property. Working with a good accountant or business adviser on the underlying issues is critical alongside the finance solution.
When a reset loan is NOT the right answer
Being direct about this because it matters:
- If the business is fundamentally not profitable, a reset loan makes the situation worse, not better. Insolvency-focused advice from a restructuring specialist is more appropriate.
- If you don’t have enough property equity to comfortably cover the debt plus loan costs, the maths doesn’t work and going to a very high LVR compounds risk.
- If the ATO debt can be managed through a payment plan without significant additional interest cost, that may be a better first step. Payment plans are legitimate and the ATO does approve them for many businesses.
- If the underlying business issues aren’t being addressed, finance is treating a symptom rather than the cause.
- If the ATO has already commenced formal recovery action, insolvency advice is likely more urgent than finance restructuring. Speak to a specialist restructuring practitioner first.
What to do first if you’re feeling the pressure
If ATO debt is weighing on you right now, five practical first steps:
8. Get the actual numbers in front of you. Log into ATO Online Services (or ask your accountant to pull the current position). Get the exact debt figure, including GIC accrued to date.
9. Talk to your accountant. Before anything else. Your accountant can flag whether a payment plan is viable, whether restructuring advice is needed, and whether a finance solution like a reset loan might fit.
10. Engage with the ATO. Not engaging is what triggers escalated recovery action. The ATO is more accommodating when you engage early and honestly than when you avoid them.
11. Get a realistic picture of your business trading. Where is revenue actually landing? Are you profitable at current cost levels? If not, why not? This is the piece that determines whether a reset loan makes sense or whether other steps are needed first.
12. Consider your options in order of severity. Payment plan first if it works. Reset loan if payment plan doesn’t cover it and the business is profitable. Restructuring advice if the business isn’t currently profitable.
Ready to talk through your situation?
If ATO debt is putting pressure on your profitable business and you own property with equity, book a free, confidential 15-minute call. We’ll look at the numbers, explain the trade-offs in plain English, and work alongside your accountant to see whether a reset loan genuinely makes sense for your situation.
If it does, we’ll help you access the right specialist lender. If it doesn’t, we’ll tell you honestly and point you toward the more appropriate next step.
Or call us on 07 5437 9073 during business hours. Our office is at 18/8 Fairfax Street, Sippy Downs.
DEALING WITH IT EARLY GIVES YOU MORE OPTIONS
Every conversation I’ve had with a business owner in this situation ends with the same reflection: they wish they’d made the call earlier. Not because the answer would have been different, but because they would have spent less time carrying the weight of it on their own. Whatever you decide, please talk to someone. Your accountant, a broker, a restructuring adviser. Just don’t keep sitting with it.
Frequently Asked Questions
Yes, through specialist (non-bank) lenders who work with property-secured lending for exactly this scenario. Most mainstream banks won’t lend directly to clear active ATO debt, but specialist lenders will if you have sufficient property equity and a profitable business.
It depends on your property equity, your business trading position, and the specialist lender’s assessment. In practice, reset loans are typically structured for ATO debts from around $30,000 up to several hundred thousand, though larger amounts are possible with sufficient security.
Specialist lenders typically charge 2 to 4 percent above mainstream bank rates. Actual rates depend on the specific lender, your LVR, and the business profile. In most cases this is still significantly cheaper than the 11.17 percent non-deductible ATO GIC, but the numbers need to be run on your specific situation.
No. In fact, engaging with the ATO and staying in good standing is usually helpful for the reset loan application, because it demonstrates you’re managing the situation actively. You don’t need to wait for things to escalate before exploring a reset loan.
Only in the sense that any lender you subsequently apply to (including the refinance-back to mainstream in 18 months) will see the loan on your credit file. The specialist loan itself is confidential between you and the specialist lender. Chris’s team handles these conversations discreetly.
From the initial call to settlement, typically 4 to 6 weeks. Specialist lenders are usually faster than mainstream banks because they’re built for time-sensitive situations. The critical first step (talking to your accountant and modelling the numbers) can happen within a few days.
Reset loans can work in either structure, but the security is typically over a director’s personal property. If you’re a company director and you’ve received a Director Penalty Notice (DPN), the personal liability makes the calculation more complex. Get restructuring advice in parallel with any finance conversation in that situation.
Yes, if you have sufficient equity in an investment property. Investment property is often preferable to using the family home as security, because it separates the business-related risk from your primary residence.
The specialist loan continues at the higher rate. We model this scenario upfront so it’s not a surprise. In most cases, if the business trades well for 18 months and the ATO position is cleared, the refinance is achievable. If the business hasn’t recovered, that’s a bigger conversation about the business itself, not just the finance.
Yes. Everything discussed with SCFS is confidential. Nothing is shared with the ATO, your bank, or anyone else without your permission. We operate under professional confidentiality standards as MFAA members. Book a call without concern.
Meet Chris Wilson, the heart of Sunshine Coast Financial Solutions (SCFS). With over a decade of experience in finance, Chris started his journey as a broker with Aussie Home Loans in 2009. His dedication earned him the title of Rookie of the Year in 2010. By 2011, he was ready to build a business based on trust and strong partnerships.
