Release from tax debt and ATO hardship

Release from tax debt means the ATO permanently cancelling some or all of an individual's tax debt because paying it would cause serious hardship (Taxation Administration Act 1953 (TAA), Sch 1 s 340-5). It is available only to individuals and deceased estates, not companies, and only for listed debts such as income tax, not GST or PAYG withholding.

It is the most complete hardship relief the ATO itself can give, and it is not easy to get. For other ways to deal with an ATO debt, see our page on tax debt lawyers. Section references below are to Schedule 1 of the TAA unless we say otherwise.

What is release from tax debt?

An individual can apply to the Commissioner to be released, in whole or in part, from an eligible tax liability (s 340-5(1)). The Commissioner may grant the release if you would suffer serious hardship if required to pay it (s 340-5(3)).

• It is permanent. The ATO treats a released debt as extinguished and, unlike a debt it has decided not to pursue, generally won't re-raise it later (ATO practice statement PS LA 2011/17 Debt relief, waiver and non-pursuit, paras 1, 4 and 8).
• It can be partial. Full release generally isn't granted where a partial release is enough to avoid serious hardship (para 29).
• It is discretionary. Even if you show serious hardship, the ATO isn't bound to release you, but it must act reasonably and not arbitrarily (para 25).

The Commissioner must notify the decision in writing within 28 days after making it (s 340-5(5)). A late notice doesn't make the decision invalid (s 340-5(6)), and the time to object runs from when the notice is served on you, not from the date of the decision.

Who can apply for release?

Release is available to two kinds of applicant (s 340-5(3)):

1. An individual who would suffer serious hardship if required to pay the liability.
2. The trustee of a deceased individual's estate, where the dependants would suffer serious hardship if the trustee paid it.

Companies can't apply for their own debts, and nor can a company acting as trustee of a family or other trust. (The deceased estate category refers simply to "a trustee", so it isn't limited to individual executors.) The ATO accepts that an individual personally liable for an eligible debt as trustee of a trust or self-managed super fund may apply (PS LA 2011/17, footnote 5).

Release won't help with a director penalty notice, because director penalties aren't eligible liabilities.

Which tax debts can be released?

Only the liabilities listed in s 340-10 can be released. If a debt isn't on the list, serious hardship makes no difference to this option.

Can be released (s 340-10)	Can't be released
Income tax	GST
Medicare levy, and Medicare levy (fringe benefits) surcharge	PAYG withholding owed by an employer
PAYG instalments	Super guarantee charge
Fringe benefits tax and FBT instalments	Director penalties
Some withholding taxes, such as non-resident withholding tax on dividends, interest and royalties, and managed investment trust withholding tax	General interest charge and penalties on GST, PAYG withholding and other debts not on the list
General interest charge on income tax and PAYG instalments, and shortfall interest charge	Judgment interest and legal costs (PS LA 2011/17, para 30)
Administrative penalties relating to income tax or FBT

A sole trader's business debts are personal debts, so a sole trader can seek release from income tax on business profits, but not from the business's GST or PAYG withholding. If the ATO has obtained judgment, the judgment interest and legal costs can't themselves be released, but the ATO says it won't pursue them if it releases the underlying debt in full, or the matching proportion on a partial release (para 30).

What counts as serious hardship for the ATO?

"Serious hardship" isn't defined in the TAA and takes its ordinary meaning. The Federal Court has said it depends on the whole of the person's circumstances, and that something less than destitution can qualify (Commissioner of Taxation v A Taxpayer [2006] FCA 888, at [13]–[17]). In that case the Court dismissed the Commissioner's appeal against a tribunal decision partly releasing a highly paid employed solicitor whose spouse had a chronic medical condition that stopped her working (at [1]–[2] and [65]).

The ATO's view is that serious hardship exists where paying the tax would leave you without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education (PS LA 2011/17, para 18). It applies three tests.

Income and outgoings

Can you pay from your income within a reasonable time? The ATO looks at household income and spending, what you need to provide for your dependants, whether you could earn more or spend less, and whether you have tried to reschedule other commitments (para 21).

Assets and liabilities

The ATO looks at assets you own, alone or with your partner, privately or through a business structure (para 22). It generally won't expect you to give up your home, a car, furniture and household goods, tools of trade, or enough cash for day-to-day living, provided they are of a reasonable nature (para 23). Other significant assets, such as investment property, boats, luxury or extra vehicles, shares and collections, are examined to see whether they could be sold or borrowed against (para 24).

Other factors

The ATO also weighs how you got here (para 27). Its examples include:

• whether release would actually relieve the hardship, or other creditors would simply take the benefit,
• whether you bought assets or paid other debts ahead of your tax,
• whether the hardship is likely to be short term,
• your compliance history,
• whether you have placed yourself in hardship, for example by putting assets in trusts or entities you control, and
• factors outside your control, including family violence, financial coercion, sudden homelessness or serious mental health challenges (added in April 2026).

How do you apply for release from a tax debt?

The application must be in the approved form (s 340-5(2)). The ATO's Debt release tool on ato.gov.au helps you check whether you are eligible to apply and gives you access to the application form (PS LA 2011/17, para 12). If your total tax debt is $10,000 or more, you complete the Application for release (NAT 15080), a fillable PDF, sign it and post it to the ATO. If it is under $10,000, the ATO says you don't need the form and can discuss release with it directly (ATO, Application for release from tax debt, last updated 25 May 2026). We can prepare the application and supporting material, but you sign the declaration yourself.

The ATO won't decide an application until you have given it all relevant information, your tax returns and activity statements are up to date, there are no outstanding amendment requests or unresolved disputes, and any insurance, compensation or damages claims are finalised (para 12).

The onus is on you to show serious hardship, so we usually put together:

• a household budget, with evidence of income and regular expenses,
• recent bank, loan and credit card statements,
• a list of assets and liabilities, with values,
• medical or other evidence of circumstances affecting your income or costs, and
• a short, candid account of how the tax debt arose and what you have done about it.

Will the ATO keep collecting while it decides?

Generally not. Recovery action is usually deferred while a release application is considered, unless the claim is frivolous or lacks merit, or there is a serious risk to recovery (PS LA 2011/17, para 16). General interest charge keeps accruing while the ATO decides, and continues on any amount that isn't released. If the ATO doesn't release all of the GIC, you can still ask it to remit the interest (para 31; see GIC remission).

What can you do if the ATO refuses?

You can object under Part IVC of the TAA (s 340-5(7)), generally within 60 days after the notice of the decision is served on you (TAA s 14ZW(1)(c)). If you miss that deadline, you can still lodge the objection with a written request asking the Commissioner to treat it as lodged in time, explaining fully and in detail why it is late. The Commissioner decides whether to agree, and a refusal can be taken to the Administrative Review Tribunal, or ART (TAA ss 14ZW(2)–(3) and 14ZX). See ATO objection time limits and late objections.

If the objection is disallowed in whole or in part, you can apply to the ART or appeal to the Federal Court within 60 days after being served with notice of the objection decision (TAA ss 14ZZ, 14ZZC and 14ZZN). The ART can extend its time limit if that is reasonable in all the circumstances (Administrative Review Tribunal Act 2024, s 19), but don't rely on an extension. The ATO says it will pay the fees for lodging an ART review of a release decision (PS LA 2011/17, para 32).

At the ART you are generally limited to the grounds in your objection, and you must prove the decision should have been made differently (TAA s 14ZZK), so the objection should set out the full case. See challenging an objection decision at the ART and Federal Court.

A refusal or partial release also doesn't stop a further application (s 340-5(4)), so you can apply again if your circumstances change or you have new material (PS LA 2011/17, para 33).

Can the ATO waive or write off a tax debt?

"Waive", "write off", "remit" and "release" are often used interchangeably, but in law they differ, and the difference decides whether the debt can come back.

Option	What it does	Legal basis	Does the debt survive?
Release	Cancels all or part of an eligible debt of an individual in serious hardship	TAA Sch 1 s 340-5	No
Remission	Cancels interest or penalties, not the tax itself	TAA s 8AAG (GIC), Sch 1 s 280-160 (SIC), Sch 1 s 298-20 (penalties)	The tax remains
Non-pursuit (formerly "write-off")	The ATO stops pursuing a debt that isn't economical to recover	Administrative decision under the Public Governance, Performance and Accountability Rule 2014, s 11 (PS LA 2011/17, paras 3–7 and footnote 1)	Yes. It can be re-raised later
Waiver	The Finance Minister cancels a debt owed to the Commonwealth	Public Governance, Performance and Accountability Act 2013, s 63	No
Deferral	Moves the due date	TAA Sch 1 s 255-10	Yes. GIC runs from the new date
Payment arrangement	Lets you pay by instalments	TAA Sch 1 s 255-15	Yes. GIC keeps running from the original due date

Waiver. Apart from a narrow power to waive tax debts to help start, conduct or end proceedings under the Proceeds of Crime Act 2002 (Sch 1 s 342-10), the Commissioner has no power to waive a tax debt (PS LA 2011/17, para 36). Only the Finance Minister or a delegate can, and it is generally a last resort (paras 34–38). The ATO may support waiver where you meet the serious hardship test but the debt can't be released, such as a sole trader's GST. It is unlikely to do so where another remedy is available, the debt is a court judgment debt or arose from fraud, or a company asks on hardship grounds (paras 43–44).

Non-pursuit. The ATO may stop pursuing a debt where, for example, recovery would cost more than the debt, the debt is old or the taxpayer can't be located (para 5). The debt still exists and can be re-raised on your account later (para 4), so non-pursuit gives breathing space, not a clean slate.

What other ATO hardship options are there?

If you are in financial hardship but release isn't available or realistic, the usual starting points are a payment arrangement built on real cash-flow figures (see ATO payment plans and payment arrangements), a deferral while a short-term problem passes, and interest and penalty remission. Also consider:

• Checking the debt. If an assessment or penalty is wrong, an objection may reduce it, provided it is lodged within the time limit or with a request for an extension.
• Super. Generally you can't take super out early to pay the ATO. See using super to pay a tax debt.
• Bankruptcy. Discharge generally releases provable debts, usually including personal tax debts (Bankruptcy Act 1966, s 153), but the consequences are serious. See ATO statutory demands, winding up and bankruptcy.

How we help

• Check eligibility. We work out which of your debts can be released and whether release is realistic on your figures.
• Prepare the application. We assemble the evidence and a submission addressing the ATO's tests in PS LA 2011/17, and ask the ATO to hold recovery action while it decides.
• Challenge a refusal. We prepare objections and act in ART reviews.
• Run the alternatives alongside. We look at payment arrangements, deferral and remission too, working with your accountant where they are involved.

Next step

Send us your ATO statement of account, a household budget, a list of your assets and debts, and any ATO letter refusing release, with the date you received it. In a first call we'll tell you whether release is realistic for your debts, how long you have to object if you've been refused, and which other options to pursue alongside it.