Yes, often, but it depends on the size of the debt, whether it is on a payment plan you are keeping to and how the lender treats it. Lenders count the plan’s repayments as a commitment, which reduces borrowing power. A business tax debt of $100,000 or more, overdue by over 90 days, can also be reported to credit reporting bureaus.

Tax debt and home loans at a glance
Situation What lenders usually see
Small debt, paid by the due date Little effect
Debt on an ATO payment plan, kept up The plan repayments count as a monthly commitment
Debt overdue with no plan A serious concern; many lenders will not proceed
Business debt of $100,000 or more, over 90 days, not engaging with the ATO May be disclosed to credit reporting bureaus

How do lenders find out about a tax debt?

Mostly from you and your documents. Self-employed applicants provide tax returns, notices of assessment and often an ATO statement of account or integrated client account. A debt on a payment plan shows there, and lenders ask about it. A business debt that the ATO has disclosed to a credit reporting bureau also shows on a credit report. Leaving a tax debt off an application is a misrepresentation and usually surfaces anyway.

When can the ATO report a tax debt to credit bureaus?

The ATO can disclose a business’s tax debt to credit reporting bureaus when all of these apply:

  • the business has an ABN and is not an excluded entity such as a registered charity;
  • it owes $100,000 or more that has been overdue for more than 90 days;
  • it is not effectively engaging with the ATO to manage the debt, for example through a payment plan.

The ATO writes first and gives 28 days to engage. Once the debt is paid or managed, the bureau can remove the information.

How much does a payment plan reduce borrowing power?

A lot, because ATO plans are short and the repayments are large. A $2,000 monthly payment plan is assessed as a $2,000 commitment. At an assessment rate of 9% over 30 years, that much repayment capacity would support about $249,000 of home loan.

A $2,000 a month ATO plan against a home loan
Amount
Monthly ATO plan repayment $2,000
Home loan that repayment would support at 9% About $249,000
Monthly repayment on $40,000 over 30 years at 6% About $240

That gap is why some borrowers ask whether the debt can be cleared from the loan itself.

Can you refinance a tax debt into a home loan?

Some lenders, often specialist lenders, will refinance or pay out an ATO debt as part of a home loan if the rest of the application is strong: enough equity, income that services the new loan and a record of keeping to the payment plan. It spreads the debt over the loan term, so it costs more interest over time, and it turns an unsecured debt into one secured on your home. It suits some borrowers and not others. The debt consolidation page explains the trade-off.

Is interest on a tax debt still deductible?

No longer. From 1 July 2025, the general interest charge and the shortfall interest charge that the ATO adds to unpaid tax are not tax-deductible. That makes a long payment plan more expensive than it used to be, and it is one more reason to compare the options with your accountant.

What do lenders want to see?

  • The ATO payment arrangement in writing, with the amount and term.
  • A history of keeping to it, usually shown on the ATO statement.
  • Up-to-date lodgement of tax returns and activity statements.
  • An accountant’s explanation of how the debt arose and is being cleared. The accountant letter template shows the format.

What should you fix before applying?

  1. Lodge every overdue return and activity statement.
  2. Put the debt on an ATO payment plan if it is not already, and keep to it.
  3. Check your credit report for an ATO listing and for errors.
  4. Ask your accountant about the cash flow effect of clearing the debt versus refinancing it.
  5. Have a broker test the application with the plan included before you sign a contract.

The self-employed lending page covers how lenders read business income, and low doc home loans covers lenders that accept other income evidence.

Questions people ask

Can I get a home loan if I owe the ATO?

Often, if the debt is on a payment plan you are keeping to and your income still services the new loan with the plan counted.

Does an ATO payment plan show on my credit report?

A payment plan itself is not a default. A business tax debt of $100,000 or more overdue by more than 90 days can be disclosed if the business is not engaging with the ATO.

Should I pay the tax debt off before applying?

If you can do it without draining your deposit, it usually lifts borrowing power the most. Otherwise compare refinancing it with keeping the plan.

Charles Touma works with self-employed borrowers carrying ATO debt and tests the application at lenders that accept a payment plan before anything is lodged. A free 30-minute call covers your returns, the plan and the lenders that fit. General information only, not tax or credit advice; ask your accountant about the tax effect of any option. Sources: ATO, disclosure of business tax debts to credit reporting bureaus; ATO, changes to deductibility of interest on ATO debts from 1 July 2025, checked 17 October 2026. Example figures use the 6% example rate and a 9% assessment rate over 30 years.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.