What happens if a small business can’t pay its tax on time?
Understand what to do if your business cannot pay a tax bill by the due date.
Summary
If a small business cannot pay a tax debt by the due date, it should still lodge on time and contact the ATO early. A payment plan may be available, but general interest charge (GIC) generally continues to accrue.
What this means
Businesses should lodge required returns and activity statements on time even if they cannot pay the full amount. If the business owes $200,000 or less, it may be able to set up a payment plan through Online services for business or an automated ATO service; larger debts generally require direct contact with the ATO.
GIC generally continues to accrue on unpaid amounts, including amounts under a payment plan. ATO general and shortfall interest charges incurred on or after 1 July 2025 are no longer deductible for income tax purposes. Contacting the ATO early can help you understand available options and reduce the risk of stronger recovery action.
Typical actions
- Lodge on time even if you cannot pay in full.
- Check whether you can set up a payment plan through ATO online services.
- Contact the ATO or a registered tax agent early if the debt is significant.
- Continue to meet ongoing lodgement and payment obligations while the plan is in place.
- Consider seeking financial advice if cash flow issues are ongoing.
Official ATO sources
Last checked: 25 August 2026
Paying the ATO
Main ATO hub for paying tax debts.
Payment plans
Explains how ATO payment plans work.
Setting up a payment plan
How to set up a payment plan with the ATO.
Denying deductions for ATO interest charges
ATO guidance confirming GIC and SIC incurred on or after 1 July 2025 are no longer income-tax deductible.
Related questions
- What tax obligations does a small business have?
- What are director’s duties for tax purposes?
- How do small businesses pay tax?
- What is a BAS?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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