ATO Debt and Your Home Loan: Can You Still Get Approved?

By Jay Perron, YML Finance

Owing money to the ATO can affect your home loan options. A lender needs to understand what you owe, how the debt is being managed and whether you can afford the proposed loan alongside your other commitments.

If you are buying a property or considering refinancing, start with a clear picture of your tax debt and borrowing position. A payment arrangement or available property equity may be relevant, but neither guarantees loan approval.

Discuss your borrowing options with YML Finance or call Jay on 0425 228 882.

How ATO debt can affect a home loan

Tax debt adds another obligation to your financial position. A lender may ask about the amount outstanding, the type of debt, repayment arrangements, your payment history and any action being taken by the ATO.

For a business owner, the assessment may also involve business financial statements, current trading results and upcoming tax liabilities. The aim is to establish sustainable income and repayments, rather than looking only at the value of your property.

Tell your broker about the debt early. Include any relevant ATO correspondence so the lending discussion is based on your current circumstances.

Can you buy a property while you owe tax?

An outstanding tax debt needs to be considered alongside your deposit, income, expenses and other debts. Lender policies differ, and a repayment arrangement does not automatically make an application acceptable.

Before committing to a purchase, establish what evidence a lender would need and whether the proposed borrowing is realistic. Any pre-approval remains subject to its conditions and the lender's final assessment.

Can you refinance to pay ATO debt?

If you already own property, you may be able to investigate refinancing or another suitable lending arrangement to pay tax debt. The amount available depends on the lender's assessment, property valuation, existing loan balance, loan purpose and your ability to repay.

Property equity alone is not enough. A lender must also be satisfied with the proposed arrangement and supporting information.

For an individual review of this pathway, visit our ATO debt consolidation page.

Compare a payment plan with borrowing

An ATO payment plan and a new loan are different ways of managing debt. Speak with your accountant or registered tax agent about your tax position and with a broker about any proposed credit arrangement.

The ATO says general interest charge can continue to accrue while debt is being paid under a payment plan. Check the terms of your arrangement and the ATO's general interest charge information.

When comparing the options, consider:

• The interest rate and all establishment, valuation, legal and ongoing fees.
• The repayment amount and whether it is sustainable.
• How long it will take to repay the debt and the total cost over that period.
• Any costs of changing your existing home loan.
• The implications of securing additional debt against your home.
• How you will meet future tax obligations without accumulating further arrears.

A lower rate or smaller monthly payment does not necessarily mean a lower total cost. Extending a debt over a longer period can increase the interest paid. A secured loan also puts the property at risk if you cannot meet the repayments.

Does ATO debt appear on a credit report?

Do not assume every tax debt is automatically listed, or that an unlisted debt can be omitted from a loan application.

The ATO can disclose eligible business tax debt information to credit reporting bureaus under specified conditions. The rules include debt amount, duration and engagement criteria; they are more detailed than a single dollar threshold. Check the tax debt disclosure rules with your tax adviser if this may affect your business.

If you have received a disclosure notice or have a credit listing, provide it during your initial review. Paying a debt should not be described as a guarantee that every credit consequence will immediately disappear.

Information to prepare for a discussion

You do not need to submit a loan application to ask about your options. Useful information for an initial conversation includes:

• Your current ATO balance and the type of tax debt.
• Any payment arrangement and recent repayment history.
• Relevant notices or correspondence, including any deadlines.
• Your existing home loan balance and an estimate of the property's value, if applicable.
• A summary of your income, other debts and regular expenses.
• Your borrowing goal and preferred timing.

For self-employed borrowers, financial statements, tax returns, BAS and business bank statements may be requested during an assessment. Read our guide to proving self-employed income for more context.

Do not send tax records or identity documents through an ordinary website enquiry. We can explain what is needed and how to provide it securely.

If the matter is urgent

If you have received a director penalty notice, garnishee notice or other enforcement correspondence, contact your accountant, registered tax agent or legal adviser promptly. A lending enquiry does not extend an ATO deadline or suspend enforcement action.

Short-term secured borrowing can involve substantial costs and a risk that the planned refinance or repayment will not be available. It requires careful assessment rather than being treated as a routine solution.

How YML Finance can help

We can review your borrowing goal, identify the information a lender may require and investigate suitable options from our lender panel. Where appropriate and with your permission, we can coordinate with your accountant.

The initial conversation helps establish whether a lending assessment is worth pursuing. It is not a promise of approval or savings. Credit assistance and tax advice are separate services.

In most cases, YML Finance receives a commission from the lender when a loan settles. Any broker fee that applies will be disclosed before you proceed. See our fees and remuneration information.

Talk through your situation

Tell us whether you are buying or refinancing, whether you own property and when you need help. We will explain the next steps and what information is needed.

Request a confidential ATO debt discussion

Prefer to speak directly? Call Jay on 0425 228 882.

General information only. This article does not consider your personal objectives, financial situation or needs and is not a credit assessment or approval. Credit is subject to lender assessment, terms and conditions. Seek appropriately licensed tax, legal and financial advice for those matters. YML Finance is operated by Acctpro Finance Pty Ltd, Australian Credit Licence 398415. View our Credit Guide, Best Interests Duty information and complaints and feedback process.