Why banks decline commercial refinances with tax debt
If your business has ATO debt — whether it's unpaid GST, income tax, or a payment plan that's fallen behind — most banks will stop the conversation right there. Banks run credit checks and ATO portal checks as standard. Any outstanding tax debt is treated as a sign that the business is under financial stress, and the application gets declined.
This happens even when the property itself is worth well more than the loan, and even when the business is still trading and profitable. The bank's system doesn't distinguish between a business that's struggling and a business that simply got behind on BAS payments during a rough quarter. The result is the same: no.
How private lenders look at this differently
Private lenders don't follow the same credit rulebook as banks. Instead of leading with your credit file and tax history, they start with three questions:
- How much is the property worth? — The property is the security. If there's enough equity, the lender has confidence the loan is protected.
- How much do you need to borrow? — This determines the loan-to-value ratio (LVR). Lower LVR means lower risk for the lender.
- What's your plan to repay? — This is the exit strategy. Usually it means refinancing back to a bank once the tax debt is cleared, or selling another asset.
If those three things stack up, the ATO debt becomes a factor in the deal — not a reason to say no. Many lenders on our panel also don't require traditional proof of income for this type of deal, which removes another barrier for self-employed borrowers.
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Check Your OptionsWhat a typical deal looks like
Illustrative example — not a real caseImagine a business owner who owns a commercial warehouse valued at $2 million. They have an existing bank loan of $800,000 and an ATO debt of $250,000 that's been building up over the past 18 months. The bank won't refinance because of the tax debt. Suppliers are getting nervous. The ATO has started sending warning letters.
A private lender might offer a loan of $1.1 million — enough to pay out the existing bank loan and clear the ATO debt entirely. The property is worth $2 million, so the LVR is 55%. The loan might be set for 12 months, giving the business owner time to get the books in order and refinance back to a bank at a lower rate.
What lenders want to see
Even though private lenders are more flexible than banks, they still need to understand the deal. Here's what makes a strong application:
- Clear property value. A recent valuation or evidence of what the property is worth. The more equity, the stronger the deal.
- Exit strategy. How will you repay the private loan? The most common exits are refinancing to a bank (once ATO debt is cleared) or selling a property.
- ATO debt details. How much is owed, whether there's an active payment plan, and whether the ATO has placed any charges on the property.
- Overall debt picture. What other loans exist on the property and what's the total borrowing relative to the property value.
When this might not work
Private lending isn't a magic fix for every situation. A deal like this might not stack up if:
- The total borrowing (existing loans + ATO debt + new costs) pushes the LVR too high — there's not enough equity in the property to make the lender comfortable.
- There's no realistic exit strategy. If there's no path to refinancing or repaying the loan within the term, lenders won't proceed.
- The ATO has already taken enforcement action that restricts the property (like a statutory charge). This can complicate settlement but doesn't always kill the deal.
Our panel includes specialist private lenders who actively fund commercial refinances where ATO debt is involved. Across these lenders:
- Credit-impaired borrowers are accepted by lenders on our panel
- Lo doc options available — some lenders don't require full financials or serviceability proof
- Settlement in as fast as 24 hours for straightforward deals
- Coverage across all Australian states and territories
The exact lender and terms depend on your specific deal. Describe your situation and our AI will match you with the most suitable lenders.
How to refinance a commercial property with ATO debt
The process is simpler than most people expect:
- Step 1: Describe your situation. Tell us what property you own, how much it's worth, what you owe (including ATO debt), and what you're trying to achieve. You don't need to have all the details sorted — just the basics.
- Step 2: Get matched. Our AI checks your scenario against specialist lenders on our panel and shows you which ones are likely to consider your deal, with plain-English explanations of why.
- Step 3: Move forward. Review the options, pick the one that fits, and connect directly. Most private lenders can give you an indication within days, not weeks.