Can I Use Property Equity to Pay ATO Debt? A Guide for Australian Business Owners
- Assurity Capital
- 10 hours ago
- 7 min read
Yes, in some circumstances. Australian business owners and investors with sufficient equity in residential, commercial or investment property may be able to use a private property-backed loan to pay an ATO tax debt, BAS liability or urgent business creditor obligation.
This type of funding is generally considered where a business needs to act quickly, cannot wait for a traditional bank application, or requires a short-term solution while arranging a longer-term refinance, property sale or capital event.
A private loan is not automatically the right response to ATO debt. It is a serious, property-secured commitment that should only be considered where the purpose is clear, the property security is suitable and there is a realistic exit strategy.
At Assurity Capital, private lending is available for genuine business and investment purposes only. Finance is subject to assessment, suitable security, eligibility, lender criteria, fees, approval and a clear exit strategy.
Can I get a loan to pay ATO debt?
Potentially, yes. A business owner may be able to obtain a secured private loan to pay an ATO debt where they have sufficient equity in property and can demonstrate a realistic plan to repay the private loan.
The loan may be secured by:
Residential property.
Commercial or industrial property.
Investment property.
Rural property.
Other acceptable real estate security.
A lender may take a first mortgage where there is no existing debt secured over the property, or consider a second mortgage where there is an existing first mortgage and enough equity remains.
The focus is not simply the amount of the ATO debt. A lender will need to assess the property security, total debt against the property, the purpose of funds, the urgency of the requirement and how the new loan will be repaid.
Why do businesses use private finance for ATO debt?
An ATO debt can place pressure on business cash flow, supplier relationships and future funding options. Some businesses face a short deadline, a payment arrangement they are struggling to maintain, or a mismatch between their immediate tax obligations and expected incoming funds.
Private property finance may be considered where:
The business has sufficient property equity but limited immediate cash flow.
A traditional bank application may take too long.
The business is awaiting a refinance, sale, settlement or expected payment.
The borrower needs to consolidate ATO debt and other business liabilities into one short-term facility.
A business owner wants to preserve an existing first mortgage rather than refinance the entire loan.
The business needs short-term capital to stabilise operations while a longer-term solution is implemented.
Private lending does not remove the underlying debt; it replaces or restructures the funding obligation. The decision should therefore be based on total costs, the timeframe and the strength of the exit plan.
Can I use a second mortgage to pay ATO debt?
Potentially, yes.
A second mortgage is an additional loan secured against a property that already has an existing first mortgage. The original lender remains in first position, while the second mortgage lender ranks behind it.
For eligible business-purpose lending, a second mortgage may allow a property owner to access available equity without replacing the existing first mortgage.
For example:
Property value: $1,800,000
Existing first mortgage: $900,000
Proposed second mortgage to pay ATO debt: $250,000
Total secured debt: $1,150,000
Combined LVR: 63.9%
Whether this type of structure is available depends on the property value, existing loan balance, property type, loan purpose, lender criteria and the proposed exit strategy.
A second mortgage is higher risk for the lender because it ranks behind the first mortgage. For this reason, terms, pricing and acceptable leverage may differ from a first mortgage facility.
What information is needed for an ATO debt loan?
A lender will need enough information to understand both the debt and the property security.
For an initial assessment, it helps to provide:
The ATO debt amount or current statement of account.
Any relevant payment-plan, demand or deadline information.
The amount of funding required.
The purpose of the loan, including whether it will also pay creditors or refinance other debt.
Property address and ownership details.
Estimated property value.
Existing mortgage lender and current loan balance.
Details of any other mortgages, caveats or security interests.
The required settlement date.
A clear explanation of how the private loan will be repaid.
The lender may request further information depending on the transaction, property type and loan structure.
Do I need full financials to get an ATO debt loan?
Not always.
Private property-backed lending can sometimes be assessed without the full tax returns, BAS statements, profit and loss reports or extensive servicing documents commonly required by a bank. However, this does not mean no assessment is required.
A private lender may focus more closely on:
Property security and market value.
Available equity.
Loan-to-value ratio, or LVR.
The purpose of funds.
The borrower’s circumstances and business background.
Existing debt secured against the property.
The certainty of the exit strategy.
Each scenario is different. A lender may still require documents or clarification where they are needed to properly assess the security, loan purpose or repayment plan.
What is the best exit strategy for an ATO debt private loan?
The best exit strategy is one that is realistic, supported by evidence and achievable within the loan term.
An exit strategy explains how the private loan will be repaid. Common examples may include:
Refinancing into a bank or non-bank business or property loan.
Sale of the secured property.
Sale of another property or business asset.
A documented business sale or capital event.
Completion and sale of a property project.
Verified incoming funds from a contracted transaction.
A future refinance should not be assumed. It needs to be based on a realistic view of future serviceability, property value, business trading and lender policy. Similarly, a property sale should account for market conditions, expected net proceeds and adequate time to complete the sale.
How quickly can a private ATO debt loan settle?
In a straightforward scenario, a private lender may be able to issue indicative terms within 24 to 48 hours. Settlement may be possible within days where property security, existing debt, legal documentation and all lender conditions can be completed promptly.
The actual settlement timeframe depends on factors such as:
The property type and location.
Whether a valuation is required.
Whether there is an existing first mortgage.
Whether the first lender’s consent or payout figure is needed.
Title, caveat or legal issues.
The complexity of the borrower’s ownership structure.
The availability of the borrower’s solicitor or conveyancer.
The quality and completeness of the information provided.
No settlement date should be assumed until the lender has assessed the scenario and confirmed the required steps.
What are the risks of using property equity to pay ATO debt?
Using property equity to pay ATO debt can relieve an immediate funding pressure, but it also puts real estate at risk if the new loan cannot be repaid.
Before proceeding, a borrower should understand:
The private loan’s interest rate, fees and total cost.
The effect of any capitalised interest on the total debt.
The combined debt secured against the property.
The proposed repayment date and exit strategy.
The risk that a refinance, sale or incoming payment may be delayed.
The consequences of default under a property-secured loan.
Whether an ATO payment arrangement or another option may be more appropriate.
Independent legal, financial and tax advice should be obtained where appropriate. Tax treatment depends on the specific use of funds and the borrower’s circumstances, so it should not be assumed.
Can I pay ATO debt and creditor debt with one private loan?
Potentially. Where the loan purpose is a genuine business or investment purpose, a private facility may be structured to pay ATO liabilities alongside eligible creditor debts, short-term business facilities or other business obligations.
This can simplify multiple repayment pressures into one defined short-term funding structure. However, the borrower should ensure the total loan amount, costs and exit strategy remain appropriate.
The lender will need a clear breakdown of how the loan proceeds will be used.
Private ATO debt finance with Assurity Capital
Assurity Capital assists business owners, investors and property professionals across Sydney, NSW and Australia with property-backed private lending.
We consider private first mortgages, second mortgages and short-term secured business loans for eligible business and investment purposes, including ATO debt, BAS liabilities, creditor payments, working capital, refinancing and urgent settlements.
Every scenario is assessed individually, with a focus on suitable property security, available equity, a clear loan purpose and a realistic exit strategy.
Finance is subject to assessment, security, eligibility, lender criteria, fees and approval.
Frequently Asked Questions
Can I use my house as security to pay ATO debt?
Potentially, for a genuine business or investment-purpose facility. Residential property may be considered as security where it is suitable, there is sufficient equity and the loan meets lender criteria.
Can I get a second mortgage to pay an ATO debt?
Potentially. A second mortgage may be considered where a property already has a first mortgage and there is sufficient remaining equity. The proposed loan must have an eligible business or investment purpose and a clear exit strategy.
Can I get an ATO debt loan without full financials?
In some private lending scenarios, full financials may not be required. The lender may focus on property security, available equity, loan purpose and exit strategy. Requirements vary by transaction.
How fast can a private loan for ATO debt settle?
Some eligible private-loan scenarios may settle within days, but timing depends on the property security, valuation requirements, existing mortgages, legal documentation and lender conditions.
Is private finance the same as an ATO payment plan?
No. A private loan is separate finance used to pay or restructure a debt. An ATO payment plan is an arrangement directly with the Australian Taxation Office. The suitability of either option depends on the individual business and financial circumstances.
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