Funding an ATO Tax Debt With Property Security
Tax debt compounds, blocks bank finance and damages credit reporting. Property-secured funding clears it quickly — here is how to structure it.
An unpaid tax debt is a uniquely awkward liability. It attracts interest, it can be reported to credit reporting bureaus once it passes reporting thresholds, and its mere existence often stops a bank from approving anything else. Left alone it rarely improves. Funded properly, it becomes an ordinary loan with a known cost and an end date.
Why banks struggle with it
Most bank credit policies treat tax arrears as a red flag rather than a fundable purpose, and cash out for statutory debt sits outside standard policy. The result is circular: the debt blocks the refinance that would clear the debt. A private lender assesses the security and the exit instead, which breaks the loop.
How the structure works
Funding is secured by Australian real property — residential, commercial or industrial — as a first or second mortgage. Proceeds are typically paid to clear the arrears in full, or to bring the account back inside an agreed arrangement. Interest can be capitalised so the business is not servicing new repayments while it recovers, with the facility repaid on a defined exit.
Full payout or partial?
Clearing the balance in full removes the interest charge, removes the reporting exposure and restores your standing with lenders. Partial funding can make sense where an arrangement is otherwise on track and a single arrears amount is the only problem. The test is simple: after the loan settles, is the business genuinely current and able to stay current? If a second shortfall is already visible, size the facility to cover both.
The exit matters most
Because tax funding does not itself create revenue, the exit has to come from somewhere else. The credible ones are:
- Bank refinance once the arrears are cleared and lodgements are current — often achievable within six to twelve months, because a clean tax position is usually the missing condition.
- Trading recovery where the arrears grew from a specific, resolved event and forward margins support repayment.
- Asset sale, where a property or piece of equipment is surplus and already saleable.
Set the term with buffer. Lodgements and refinances slip; a facility that expires the week your accountant finishes is too tight.
Do the maths against the alternative
Compare the cost of the facility over its actual term against the general interest charge accruing on the debt, the risk of escalating recovery action, and the deals you cannot do while the arrears sit on your file. For many businesses the secured facility is not just faster, it is cheaper in total.
Preparing the application
- An ATO portal statement or notice showing the balance and any arrangement.
- Rates notice and title for the security property, plus statements for existing mortgages.
- A short written explanation of how the arrears arose, and what has changed.
- Lodgement status — what is outstanding and when it will be filed.
- The exit, named and dated.
Disclose everything. Tax debt discovered by a lender mid-process stops a settlement; tax debt disclosed at the start is simply part of a fundable scenario. Malouf Capital lends to business and investment borrowers, secured by Australian real property, subject to credit assessment, security and approval. Send us the numbers and we will respond with an indicative rate, LVR and timeline.