ATO payment plans and payment arrangements

An ATO payment arrangement, or payment plan, lets you pay an ATO debt by instalments. If you owe $200,000 or less, you may be able to set one up yourself online or through the ATO's self-help phone line. If you owe more, need longer than two years or the online system won't accept your plan, you phone the ATO and negotiate one, usually backed by detailed information about your finances.

The Commissioner can agree an arrangement under the Taxation Administration Act 1953 (TAA), Sch 1 s 255-15(1), but it doesn't change the date the debt was due. Interest keeps running, and a plan only helps if you can keep to it. We prepare and negotiate payment proposals as part of our work on tax debts, usually alongside the client's accountant.

How do you set up a payment plan with the ATO?

The ATO's guidance (Setting up a payment plan, last updated 9 October 2026) has two routes, depending on how much you owe and your history.

If you owe $200,000 or less

You may be able to set it up yourself:

• Individuals and sole traders: in ATO online services through myGov, select Tax, then Payments, then Payment plans.
• Businesses: in Online services for business, select Accounts and payments, then Payment plans.
• By phone: through the ATO's self-help or automated business phone service.
• Through your agent: a registered tax or BAS agent may be able to set it up for you.

The system suggests an upfront payment and instalments, which you can adjust within limits. Income tax and activity statement debts need separate plans, and you can only set up one plan at a time this way. The ATO's online estimator gives a guide to the upfront amount and interest, but not for super guarantee charge debts (ATO, Payment plans, last updated 24 February 2026).

When you need to phone the ATO

You'll need to call the ATO's lodge and pay enquiry line and answer more questions about your circumstances if you:

• owe more than $200,000, or need more than two years to pay,
• couldn't set up a plan online, or need to renegotiate an existing plan, or
• are insolvent, bankrupt or in dispute, or need extra support because of significant financial hardship.

You may also need to call if you've had a warning of firmer recovery or legal action in the past six months (or the ATO has already acted), or you've defaulted on or cancelled two or more payment plans in the past 12 months.

What does the ATO ask for before agreeing to a payment arrangement?

Under its debt collection practice statement, PS LA 2011/14, the ATO won't accept payment arrangements "as a matter of course" (para 52), and it is up to you to show you can't pay by the due date (para 55).

A proposal should generally come with an initial payment of whatever you can afford now, and should (para 57):

• explain why the debt wasn't paid on time, and show you can't pay in full, not just that you've chosen not to,
• set out your financial position, including what you've done to raise funds and what you're paying other creditors,
• show the ATO is getting the same priority as your other debts, such as credit cards and mortgages,
• propose paying the full debt, including interest and any recovery costs, in the shortest possible time, and
• explain how new tax debts will be paid on time so the total doesn't grow.

The ATO asks about bank balances, lines of credit, income, expenses and assets (ATO, Setting up a payment plan). For a business, we usually support a proposal with recent management accounts, a 12-month cash-flow forecast and debtor and creditor lists.

The ATO also weighs up (para 58):

• Lodgement. It is unlikely to agree a plan with someone who keeps failing to lodge or pay on time (para 52).
• Why you fell behind, including whether the cause was outside your control, such as a natural disaster or family violence.
• Recovery already under way, and whether a garnishee notice or other option would get the debt paid sooner.
• Risk. For long arrangements the ATO may accept security, such as a registered first mortgage, and you would be expected to pay the legal costs of the mortgage (para 14). A plan running beyond one financial year may require security or a surety (para 61).

The ATO expects you to acknowledge the debt and, if court proceedings have started or are about to, to consent to judgment if you default (paras 62 and 65). Keep paying what you've proposed while the ATO considers it (para 63).

Does the ATO charge interest on a payment plan?

Yes, generally. An arrangement doesn't vary the time the debt was due, so general interest charge (GIC) keeps accruing from the original due date (TAA Sch 1 s 255-15(2)). GIC compounds daily (TAA s 8AAC) at the base interest rate plus 7 percentage points (TAA s 8AAD), and for income years starting on or after 1 July 2025 it can't be deducted (Income Tax Assessment Act 1997, s 26-5(1A)). The longer the plan, the more interest you pay.

The ATO offers two alternatives (ATO, Alternative payment plans, last updated 3 September 2026):

• Interest-free plans for small businesses. A business may be eligible to pay overdue activity statement amounts interest-free over 12 months if it has annual turnover under $2 million, owes $50,000 or less from recent activity statements overdue for up to 12 months, has a good payment and lodgement history (no more than one plan default in the past 12 months and no outstanding activity statements), can't get finance through normal business channels and can show it is viable. The plan must be paid by direct debit within 12 months. GIC is still charged, but it is automatically remitted as long as the plan is kept.
• Secured plans. If a plan can't otherwise be agreed, the ATO may accept security, preferably a registered mortgage over freehold property or an unconditional undertaking to pay given by an Australian bank.

You can ask the ATO to remit some or all of the GIC (TAA s 8AAG), but you must show remission is warranted (PS LA 2011/14 para 64). It often makes sense to raise it while the plan is negotiated. Our guide to interest on ATO payment plans explains how.

What happens if you miss a payment plan instalment?

The ATO can end an arrangement and recover the whole outstanding debt, with GIC from the original due date, if (PS LA 2011/14 paras 71 and 72):

• you don't pay an instalment as agreed,
• you don't lodge, or don't pay new tax debts on time, while the plan runs,
• the information you gave the ATO was false or misleading, or
• your circumstances change and the ATO decides to end the plan rather than vary it.

The ATO says it can act without further warning (para 65). Two practical points:

• Refunds are generally offset against the debt and don't replace an instalment (ATO, Payment plans). The ATO can choose not to offset against a debt under an arrangement you've complied with (TAA s 8AAZL(3)(b)), and says it will do so where that is fair and reasonable (PS LA 2011/14 para 69). But it generally tells you during negotiations that offsets will occur (para 70), so don't count on it.
• Credit cards. After 30 June 2027 the ATO won't accept credit card payments, so a plan paid by credit card direct debit must move to another method or it may default (ATO, Setting up a payment plan).

If you can see an instalment will be missed, contact the ATO before it falls due and ask to vary the plan.

Does a payment plan stop ATO recovery action?

Only partly. The ATO treats an instalment arrangement as an alternative to formal recovery (PS LA 2011/14 para 49), but some recovery action can continue.

Director penalty notices

While an arrangement covering the company's debt is in force, the ATO can't start, or take a procedural step in, court proceedings to recover a director penalty (TAA Sch 1 s 269-15(3)). That protection ends if the plan defaults or is cancelled, and on its terms it doesn't stop other recovery steps such as a garnishee notice.

The plan doesn't stop the ATO giving a director penalty notice, doesn't remit the penalty and doesn't extend the 21 days after a notice in which company action can remit it (s 269-15(3), note 2; s 269-30(1)). Check that the arrangement covers the PAYG withholding, GST or super guarantee charge the notice relates to. Our guide to payment plans for director penalty notices explains how the plan and the 21 days interact.

Garnishee notices and court action

A plan doesn't stop the ATO acting if it sees a risk to the revenue, preferential payments to other creditors or a significant change in your circumstances (PS LA 2011/14 para 66). If a garnishee notice is already in place, we ask the ATO to vary or withdraw it as part of the arrangement.

Statutory demands

A company served with a statutory demand generally has 21 days from service to comply, and any application to set the demand aside must be filed, with a supporting affidavit, and served on the ATO within that period (Corporations Act 2001, ss 459F and 459G). Negotiating a plan doesn't by itself stop the time running, so unless the ATO withdraws the demand in writing, act within the 21 days. See ATO statutory demands, winding up and bankruptcy.

Does an ATO payment plan affect your credit rating?

The ATO can report certain overdue business tax debts to credit reporting bureaus, but only after giving the business written notice and waiting 28 days (TAA Sch 1 s 355-72). Debt covered by a payment plan you are keeping to is generally left out when the ATO works out whether a business can be reported. Our guide to small business tax debt and ATO credit reporting explains the criteria and how to respond to a notice.

Can you negotiate a tax debt with the ATO?

Yes, but tax debt negotiation with the ATO is mostly about how and when you pay, not how much. You can usually negotiate:

• The terms of the plan: the upfront payment, the instalments and the length of the plan.
• The timing of recovery action while a proposal is being considered.
• Interest and penalties. Remission of GIC (TAA s 8AAG) and of administrative penalties (TAA Sch 1 s 298-20) are separate requests, often made at the same time.

A payment plan doesn't reduce the tax itself. If an assessment or decision is wrong, the answer is usually an ATO objection, not a payment plan, and objections have strict time limits.

Are there alternatives to an ATO payment plan?

Yes. Depending on your situation, they include:

• Deferring the due date. The ATO can defer the payment time by written notice (TAA Sch 1 s 255-10). It generally does so only if circumstances beyond your control, such as a natural disaster, serious illness or a legal impediment like probate not yet being granted, stopped you paying on time, you can pay in full at a later date, and future debts will be paid on time. The ATO says such cases are uncommon (PS LA 2011/14 paras 30 to 32). Unlike a payment plan, a deferral changes the due date, so GIC runs only from the deferred date (note to s 255-10(1); PS LA 2011/14 para 28).
• Refinancing or selling assets to pay in full. GIC compounds daily and is no longer deductible, so compare its cost with the cost of finance.
• Release from the debt. Individuals can apply to be released from some tax debts if paying would cause them serious hardship, and so can the trustee of a deceased estate if the deceased's dependants would suffer serious hardship (TAA Sch 1 s 340-5). Release isn't available to companies and doesn't cover GST or PAYG withholding (s 340-10). See release from tax debt and ATO hardship.
• Formal insolvency options. For a company that can't pay its debts, administration, small business restructuring or liquidation may be the answer, but each affects directors' personal exposure differently.
• Compromise. The ATO accepts less than the full amount only in limited circumstances. Under its policy, an offer generally must be at least your total net assets, must give the revenue more than bankruptcy or liquidation would, and can't rest on hardship alone. The ATO won't consider one for a disputed debt, if you could use a debt agreement under Part IX of the Bankruptcy Act, or if you've been through a compromise or formal insolvency process in the past 5 years (PS LA 2011/3, paras 51, 53, 57, 67, 71 and 72). Don't plan around it.

When should you get a lawyer involved?

An accountant or BAS agent can usually set up a straightforward ATO debt payment plan online. We usually come in when the debt is large, a plan has been refused or has defaulted, a director penalty notice, garnishee notice or statutory demand has arrived, or the debt itself may be wrong. We prepare the proposal and evidence, deal with the ATO, raise GIC remission where there are grounds, and keep your accountant involved.

Next step

Send us your latest ATO statements for both the income tax and activity statement accounts, any ATO letters (especially a default notice, director penalty notice, garnishee notice or statutory demand) and a short note of what you could realistically pay upfront and each month. In a first call we'll tell you whether a self-service plan is enough or a negotiated arrangement is needed, and what the ATO is likely to want to see.