If you have fallen behind on a BAS, PAYG or income tax bill, you are far from alone. Small business currently accounts for the large majority of the ATO's outstanding collectable debt, and the ATO has been visibly ramping up how hard it chases it. What matters is what you actually do next, not how you got there.
The Australian National Audit Office has reported the ATO's total collectable debt at around $54.2 billion, with small business responsible for roughly $35.9 billion of that, close to two-thirds of the total. That scale is exactly why the ATO has stepped up enforcement activity over the last couple of years, and it is worth taking seriously rather than assuming the ATO will let it slide.
For debts up to $200,000, you or your tax agent can usually set up a payment plan yourself through ATO online services or your myGov account, without needing to speak to anyone. Above that threshold, or if you are in genuine hardship, already in a dispute, need more than two years to pay, have had legal action taken against you, or have defaulted on a plan twice in the last 12 months, you will need to call the ATO directly or have your tax agent negotiate on your behalf.
Setting up a payment plan does not stop interest accruing. The General Interest Charge, or GIC, applies to any unpaid amount from its original due date and compounds daily. The current rate is 11.43% per annum. It is also worth knowing that from 1 July 2025, GIC and the related Shortfall Interest Charge are no longer tax deductible, which makes carrying ATO debt more expensive than it used to be in real terms, not just in the ATO's published rate.
This is where it gets genuinely serious, and where the ATO's enforcement activity has increased the most. Director Penalty Notices, which make company directors personally liable for unpaid PAYG withholding, superannuation guarantee and GST, were issued roughly three times as often in the 2024-25 financial year compared to the year before. Once issued, a director generally has 21 days to pay the debt, put the company into administration, or wind it up, before the ATO can pursue them personally. The ATO also issued more than 15,000 garnishee notices in the same period, directing banks or debtors to pay the ATO directly, and disclosed close to 24,000 businesses' tax debts to credit reporting bureaus, which happens once a debt of $100,000 or more has been overdue for more than 90 days and the business is not engaging with the ATO. That disclosure comes with a 28-day written warning first, and setting up a payment plan within that window stops it.
Behind on tax and not sure where you stand, or want help negotiating a payment plan before it escalates? Book a free call and we will help you work out the best path forward.
Every consequence above, the DPN, the garnishee notice, the credit bureau disclosure, is aimed at debts where the business has gone quiet rather than engaged. A payment plan set up proactively, even a modest one, generally avoids all of it. The ATO's own settings are built to escalate against silence, not against businesses that are visibly trying to sort things out.
Ignoring ATO contact. Letters and calls do not stop being relevant just because you have not opened them.
Assuming a payment plan pauses interest. GIC keeps accruing on the outstanding balance the whole time.
Waiting until a Director Penalty Notice arrives. By that point your personal assets are exposed, not just the company's.
Trying to negotiate a large or complex debt without an agent. Above $200,000, or in hardship situations, having a tax agent involved genuinely changes how the conversation goes.
ATO debt is being chased harder than it has been in years, but the fix for most businesses is straightforward: set up a payment plan before it escalates, understand that GIC keeps accruing at 11.43% and is no longer deductible, and get help early if the debt is large or your situation is complicated. The businesses that get hit hardest are the ones that go quiet.
We help clients negotiate payment plans and get on top of ATO debt, with fixed fees agreed upfront and every question answered within 24 hours. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
.png)
