Behind with the ATO? Payment plans, garnishees and statutory demands
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The ATO usually starts with letters and a chance to set up a payment plan. If the debt is not dealt with, it can move to firmer action: garnishee notices on bank or merchant facilities, reporting debts of $100,000 or more to credit bureaus, director penalty notices, statutory demands and winding up the company. The earlier it is dealt with, the more options stay open.
Payment plans
A plan is paid weekly, fortnightly or monthly over a fixed period. GIC keeps accruing, compounding daily. Income tax and activity statement debts take separate plans. Missing a new lodgement or payment can default the plan, making the whole balance due.
Garnishee notices
The ATO can direct a bank, a merchant facility such as EFTPOS or card, customers who owe money, or the sale of property to pay the debt instead. A warning letter and a copy of the notice come first. The notice can be varied or withdrawn with a suitable payment arrangement, so it is worth calling the ATO straight away.
Credit reporting
The ATO may report a business tax debt to credit bureaus where at least $100,000 is overdue for more than 90 days and the business is not engaging with it. A payment plan that is being kept to counts as engaging.
Statutory demands
The ATO, like any creditor, can serve a statutory demand on a company for $4,000 or more. There are 21 days from service to pay, agree terms, or apply to court to set it aside. Missing that window means the company is presumed insolvent, which is grounds to wind it up. Disputing it means a court filing inside the 21 days, so a lawyer needs to be involved the day it arrives.
Director penalty notices
For unpaid PAYG withholding, GST and super guarantee charge, the ATO can make a director personally liable. See the director penalty notice page for the 21-day process.
What about borrowing to pay it
A loan swaps an ATO debt for a lender's debt, often with security over a house. Sometimes that is the right call. If the business keeps falling behind, the new debt follows after the company is gone. Talk to a licensed broker and an independent adviser before signing anything. 180 does not arrange finance.
Questions people ask
Can the ATO freeze a business account?
It can garnishee funds in it, up to the debt.
Will a payment plan stop credit reporting?
Yes, while it is being complied with.
Can small business restructuring deal with ATO debt?
In a small business restructure, creditors vote on a plan, which often compromises debt, and the ATO is often the deciding vote. Eligibility rules apply, so ask an SBR practitioner.
Sources
ATO, Payment plans, ATO, Garnishee notice, ATO, Disclosure of business tax debts, ATO, Legal action we may take, ATO, Small business restructuring, TPB public register. Checked 21 October 2026.
Formal notice? Call 0489 080 360 and contact your qualified adviser promptly.
Written by Mike Haydon. Reviewed by [PLACEHOLDER: registered liquidator or lawyer, registration number, date].