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Local Knowledge Finance

Can I refinance my home loan to pay ATO debt?

Short answer

Sometimes. Some lenders will consider a refinance or top-up to clear tax debt, after a full assessment of your income, expenses and equity. Before deciding, compare it with keeping the ATO payment plan: rolling tax debt into a home loan secures it against your home and can mean paying interest over a much longer term.

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This answer is awaiting review by James Chee CPA. Written by Local Knowledge Finance editorial team. Check the dated sources below and talk to a broker about your own situation.

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What lenders will want to see

  • General interest charge keeps accruing on tax debt during a payment plan. [ATO]
  • The ATO says general interest charge incurred from 1 July 2025 is not tax deductible. [ATO]
  • Moneysmart warns that consolidating into a longer loan can cost more in total, and that unsecured debt becomes secured against your home. [Moneysmart (ASIC)]
  • The ATO offers other payment arrangements if a standard plan is not manageable. [ATO]

Who this may suit

  • Owners with equity and steady income who understand the tax debt becomes secured against the home
  • Borrowers whose tax lodgments are up to date and whose business is no longer building new tax debt

Who it may not suit

  • Businesses still falling behind on tax: refinancing does not fix the cause
  • Anyone for whom the new repayments would be tight

Your options, including not borrowing

  • Keep the ATO payment plan and do not borrow. This keeps the debt off your home.
  • Ask the ATO about a different arrangement if repayments are too high. [ATO]
  • Refinance or top up, keeping the tax portion in its own loan split and paying it off faster than the home loan.
  • Review business cash flow and tax with your accountant before taking on new debt.

Risks to weigh

  • If you cannot keep up repayments, your home is at risk. [Moneysmart (ASIC)]
  • Spreading the debt over a longer term can mean more interest in total. [Moneysmart (ASIC)]
  • Switching can involve break costs, fees and a new credit enquiry.
  • New tax debt can build up again if the cause is not fixed.

Next steps

  1. 1Get your ATO statement of account and current plan terms.
  2. 2Compare the total cost of the plan with the total cost of refinancing, not just the regular repayment.
  3. 3Ask us to check whether a refinance is possible before you apply anywhere.

Common follow-up questions

It depends on cost, cash flow and risk. A payment plan keeps the debt unsecured, but interest keeps accruing. A refinance may lower the regular repayment but puts the debt against your home and can cost more over a longer term. Compare the total cost and the risk to your home; staying on the plan can be the right call.
The ATO says general interest charge incurred from 1 July 2025 is not deductible. Whether interest on a loan used to pay tax debt is deductible depends on your circumstances, so ask your tax agent.
Expect questions about how the debt arose and whether lodgments are now up to date, because lenders must understand your financial situation before lending.

Sources

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General information about credit only. It is not tax, financial, superannuation or Centrelink advice and does not take your objectives, financial situation or needs into account. Lender policies change; any loan is subject to lender assessment and approval.

Tax help is a separate service provided by Local Knowledge Pty Ltd, Registered Tax Agent 77912009. Local Knowledge Finance does not give tax advice.

Ding Financial Pty Ltd t/a Local Knowledge Finance, Corporate Authorised Credit Representative 517980 of Global Mutual Funds Pty Ltd (ACL 222640). Sydney · 02 8338 8900 · [email protected]

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