An ATO payment plan lets your business pay an overdue tax debt in smaller weekly, fortnightly or monthly instalments instead of one lump sum. It's for small businesses and sole traders who can pay, just not all at once. If you owe $200,000 or less, you may be able to set one up online yourself.
Owing the ATO is more common than most people admit, and what matters is what you do next. This guide covers how a plan works, which way to apply, what the ATO expects, and how to get your numbers ready first.
What is an ATO payment plan? An ATO payment plan is an agreement to pay a tax debt by instalments over the shortest fixed period you can manage. You pay an agreed amount weekly, fortnightly or monthly until the balance is cleared, and you must keep paying any new tax debts in full and on time while the plan runs (ATO: payment plans).
If you want the bigger picture on how tax debt builds and escalates, our earlier guide to ATO tax debt in 2026 covers that background. This post sticks to one job: the payment plan process itself.
When an ATO payment plan makes sense
A payment plan is a good fit when the debt is real, the business is still trading, and you can see a realistic path to paying it off. Typical examples:
- Your BAS bill landed at a bad time. The GST and PAYG withholding are owed, but cash is tied up in unpaid invoices or stock.
- Your income tax assessment was bigger than expected. A good year can leave you with a tax bill you didn't set money aside for.
- You've just caught up on old lodgements. Bringing overdue BAS up to date often reveals debts that were sitting there quietly.
A plan spreads the cost; it doesn't erase it. The ATO is clear that debts on a plan still accrue general interest charge (GIC), which compounds daily, so the shorter the plan, the less interest you pay (ATO: payment plans). If you can pay in full with a short-term squeeze, that's usually cheaper. If you can't, a plan is far better than ignoring the debt.
If the debt feels too big for any plan, or you're worried about whether the business can keep trading, that's a conversation for your accountant, tax agent or a qualified insolvency adviser before you commit to instalments.
Online, phone or through your BAS agent: which way to apply
There are a few ways to set up a plan. The right one depends on how much you owe and how complicated things are.
1. Online services (the quickest option)
The ATO says the quickest way to set up a plan is online (ATO: setting up a payment plan). If you owe $200,000 or less, you may be able to do it yourself:
- Sole traders use ATO online services through myGov, then go to Tax, Payments, then Payment plans.
- Businesses use Online services for business, then go to Accounts and payments, then Payment plans.
The online tool suggests an upfront amount and instalment amounts based on what has worked for similar businesses. You can adjust them within limits. You can also set up direct debit and SMS or email reminders as you go (ATO: accounts and payments in Online services for business).
2. The ATO's self-help phone line
If you owe $200,000 or less, there's also an automated phone service for business. Have your ABN and/or TFN ready, plus the exact amount owing on each account. Don't combine debts from different accounts into one figure.
3. Talking to a person at the ATO
According to the ATO, you'll need to phone its lodge and pay enquiry line if you:
- owe more than $200,000
- couldn't set up a plan online or through the self-help line
- need to renegotiate an existing plan
- need extra support because of significant financial hardship
- are insolvent, bankrupt or in dispute
- need longer than two years to repay.
You may also need to call if you've had a warning of firmer recovery action in the past six months, or you've defaulted on or cancelled two or more plans in the past 12 months. Expect more questions in those situations.
4. Through your registered tax or BAS agent
Your registered tax or BAS agent may be able to set up a payment plan for you through Online services for agents (ATO: setting up a payment plan). That's handy if your agent already has your figures and you'd rather not navigate the portal yourself.
Separate debts need separate plans
This one trips people up. Your income tax account and your activity statement account are different accounts at the ATO, and they need separate payment plans. If you have overdue debts on more than one account, you need to either pay them in full or set up a plan for each. The ATO warns that if you don't, you may face firmer action.
Online services and the self-help phone line only let you set up one plan at a time, so if you have two accounts in debt, plan for two separate sessions.
What the ATO will expect from you
A payment plan comes with conditions. Knowing them up front makes it far less likely your plan falls over.
- Lodge everything on time. All your future BAS, IAS and returns need to go in on time while the plan runs.
- Pay new debts in full and on time. Your next quarter's BAS isn't added to the plan automatically. Pay it when it's due, or set up a separate plan for it.
- Make every instalment. Direct debit is the easiest way to stay on track.
- Expect GIC to keep accruing. On a standard plan, interest keeps compounding daily on the balance.
- Refunds get offset. Any refund or credit you're owed will be used to reduce your debt, but it doesn't replace your scheduled instalment.
The big risk is default. The ATO says that if you don't keep up with your ongoing obligations, your plan may default and the full overdue balance becomes payable immediately. That's why lodging on time matters even in a tight month. If you have outstanding lodgements right now, getting them in before you apply is a sensible first step, and a registered BAS agent can help with that.
You can make extra payments or pay the debt off early at any time. If you do pay early, remember to cancel the plan so the remaining direct debits stop.
Need help getting your BAS lodgements up to date before you apply? We're a registered BAS agent and Xero Certified Advisor with 20+ years' experience, working with small businesses Australia-wide. Get a free quote or book a discovery call and we'll reply within one business day.
Interest-free plans for overdue activity statement debts
Some small businesses can pay overdue activity statement amounts over 12 months without paying interest. The ATO lists these eligibility criteria (ATO: alternative payment plans). Your business must:
- have annual turnover of less than $2 million
- have recent activity statement amounts owed of $50,000 or less, overdue for up to 12 months
- have a good payment and lodgment history, including no more than one payment plan default in the last 12 months and no outstanding activity statement lodgments
- be unable to get finance (such as a loan) through normal business channels
- be able to show it's still viable.
You must agree to pay by direct debit within 12 months. Technically GIC is still charged, but as long as you keep the plan going, the ATO automatically remits it once it appears on your account. You still have to meet all your other lodgment and payment obligations.
Already on a standard plan for an activity statement debt? If you meet the criteria, you can ask the ATO to switch it to an interest-free plan by phoning the business enquiry line. If approved, the old plan is cancelled and the interest-free period starts from the date of the new plan.
It only covers activity statement debts, not income tax, and you qualify only once the ATO confirms it.
How to prepare before you apply
A little preparation makes the form quicker and any phone call less stressful. Have these ready.
- Know your exact balance on each account. Check your latest ATO notice or log into online services. Note which amounts are activity statement debts and which are income tax.
- Get your books up to date. You can't plan around a number you don't trust. Reconciled bank accounts and current lodgements mean your balance won't change halfway through the process.
- Work out what you can pay today. The ATO asks you to think about how much you can pay upfront and when you'll be able to pay in full. A bigger upfront payment reduces the balance that's accruing GIC.
- Map your cash flow. List your expected income and expenses for the next few months, including your upcoming BAS, super and wages. An instalment you can't sustain is worse than a slightly longer plan you can.
- Try the ATO's payment plan estimator. The ATO's online estimator shows a likely upfront amount, minimum repayment, payoff time and an estimate of the interest you'll pay. Use it as a guide before you apply.
- Gather details for a phone call. If you're calling, the ATO says it may ask why you can't pay by the due date, for your bank details and balances (including lines of credit), your income, expenses and assets. The Moneysmart budget planner is a good way to pull this together.
- Decide how you'll pay. Direct debit from a bank account is simplest. The ATO says credit cards can't be used for ATO payments after 30 June 2027.
If your bookkeeping is months behind, start there. Our guide to catch-up bookkeeping in Australia explains how to get the backlog sorted without judgment.
What a bookkeeper or BAS agent can help with (and when you need a tax agent)
Payment plans sit between bookkeeping and tax advice, so here's who does what.
A registered BAS agent, like Girl Friday Australia, can help you:
- bring overdue BAS and IAS lodgements up to date
- reconcile your accounts so your debt figure is accurate
- show you exactly what's owed on your activity statement account
- build a simple cash flow view so you can choose an instalment you can sustain
- keep your future BAS lodged on time so your plan doesn't default.
See our BAS and IAS lodgement service (from $180 a quarter) for how that works.
Speak to a registered tax agent or accountant if:
- your debt is mainly income tax, or you need help with an income tax return
- you're weighing up finance, restructuring or whether the business is viable
- you want advice on remission of penalties or interest
- you've received a director penalty notice or legal action from the ATO.
Those areas go beyond BAS-agent scope.
Frequently asked questions
Can I set up an ATO payment plan online for my business?
Usually, yes, if you owe $200,000 or less. Log in to Online services for business and go to Accounts and payments, then Payment plans. Sole traders can use ATO online services through myGov. If the online system doesn't accept your plan, phone the ATO's lodge and pay enquiry line.
Does interest stop once I'm on a payment plan?
Not on a standard plan. GIC keeps compounding daily on the outstanding balance, so paying it off faster reduces what you pay overall. Eligible small businesses on an interest-free activity statement plan have GIC automatically remitted as long as the plan is maintained.
Can I put my BAS debt and income tax debt on the same plan?
No. The ATO requires separate payment plans for your income tax account and your activity statement account. Online services and the self-help phone line let you set up one plan at a time.
What happens if I miss an instalment or a new BAS payment?
Your plan may default, which can make the full overdue balance payable straight away. If you can see a missed payment coming, contact the ATO before it happens. Renegotiating a plan needs a phone call to the lodge and pay enquiry line.
Can my BAS agent set up the payment plan for me?
A registered tax or BAS agent may be able to set it up on your behalf using Online services for agents. They can also check your running account balance and help you keep future lodgements on time.
How long can an ATO payment plan last?
The ATO wants debts paid over the shortest period you can manage. If you need longer than two years, you'll need to phone the ATO and explain your circumstances. Interest-free activity statement plans must be paid within 12 months.
Get your numbers straight before you call
A payment plan works best when you know exactly what you owe, your lodgements are current, and the instalment fits your real cash flow.
If you'd like a registered BAS agent in your corner, Girl Friday Australia can bring your books and BAS up to date, show you what's owed, and keep you on track afterwards. We're 100% Australian, work remotely Australia-wide, and there are no lock-in contracts.
Get a free quote, book a discovery call, call 0404 877 436 or email info@girlfridayaustralia.com. We're available Monday to Friday, 9am to 5pm AEST, and we reply within one business day.