Transport and logistics businesses can be profitable but still struggle with cash flow. Customers may take weeks to pay, while fuel, wages, insurance, tolls, repairs and vehicle repayments must be paid on time.
As a result, businesses may delay GST, PAYG or income tax payments, causing ATO debt to grow quickly.
ATO debt finance may help an eligible business pay some or all of its outstanding tax debt. The business then repays the lender under a new loan arrangement.It won’t make the debt disappear, but it could make repayments easier to manage while leaving enough cash for everyday costs and upcoming expenses.
What Should a Transport Business Do About ATO Debt?
First, check exactly how much your business owes the Australian Taxation Office. Also, confirm which payments are overdue and whether interest or penalties have been added.
Next, keep your BAS and tax returns up to date. Do not delay lodgements simply because you cannot pay the full amount.
Acting early may give your business more options.
Check Whether an ATO Payment Plan Is Affordable
The ATO may offer a payment plan to an eligible business. However, you should check whether the repayments suit your actual cash flow.
For example, an instalment may seem affordable during a busy month. Later, it may become difficult when several expenses are due together.
Include the following costs in your forecast:
- Fuel and tolls
- Driver wages
- Truck repayments
- Registration and insurance
- Tyres and repairs
- Upcoming BAS and tax payments
Some unpaid company tax debts can make directors personally liable. Therefore, do not ignore formal ATO recovery notices.
If your business is struggling to pay its debts on time, talk to an Australian accountant, tax adviser, lawyer or insolvency professional as soon as possible.
ATO Debt Finance Strategies for Transport Businesses
There is no single solution for every transport operator. The right strategy depends on the size and age of the ATO debt, current cash flow, unpaid customer invoices, existing vehicle loans and available security.
Before choosing an option, the business should check whether it can manage the proposed repayments while also paying future BAS, GST, PAYG withholding and super obligations.
1. Negotiate an ATO Payment Plan
An ATO payment plan may suit a business that can clear its debt through regular instalments while continuing to meet new tax obligations.
However, repayments should be tested against slower trading periods and large expenses such as registration, insurance, tyres and truck repairs.
Business owners can learn more about the advantages and limitations of payment arrangements in our guide to ATO debt repayment options for Australian businesses.
2. Request Remission of the General Interest Charge
The ATO generally applies a General Interest Charge, or GIC, when a tax liability is not paid on time. In some circumstances, a business may request the remission of some or all of this interest.
Approval is not guaranteed. The business generally needs to explain what caused the late payment and provide enough information to support its request. Even if the interest is reduced, the original tax debt will still need to be paid.
3. Use a Dedicated ATO Tax Debt Loan
Eligible businesses may use an ATO debt finance facility to pay some or all of their outstanding tax debt. The ATO liability is then replaced with a commercial loan that is repaid over an agreed term.
This form of tax debt refinancing in Australia may provide a clearer repayment structure. However, the interest rate, fees, term, security requirements and total cost should be compared carefully.
A business loan for ATO debt must also leave enough cash for fuel, wages, tolls, repairs and future tax bills. Otherwise, the business may clear its current liability but begin accumulating new ATO debt.
4. Consider Secured ATO Debt Finance
Secured ATO debt finance may use commercial or residential property, or another asset accepted by the lender, as security.
Depending on the lender and the business’s circumstances, secured finance may provide access to a larger amount, a longer term or more competitive pricing.
However, offering security creates a serious financial commitment. The secured asset may be at risk if the business cannot make its repayments. Therefore, the operator should also consider existing mortgages and vehicle finance before choosing this option.
5. Explore Unsecured ATO Debt Finance
Some specialist lenders may consider ATO debt finance without property. Approval may depend on business turnover, cash flow, trading history, credit profile, bank-account conduct and the size of the ATO liability.
Unsecured ATO debt finance can involve shorter terms, higher pricing or larger regular repayments. Therefore, approval speed should not be the only consideration.
The business should confirm that the repayment remains affordable during quiet freight periods or when major fleet expenses arise. Our guide comparing Full Doc and Low Doc business loans provides more information about documentation and repayment considerations.
6. Use Debtor or Invoice Finance to Improve Cash Flow
Transport businesses often complete jobs several weeks before customers pay their invoices. Debtor or invoice finance may release part of the value of eligible unpaid invoices, giving the business earlier access to working capital.
The released funds may help the operator manage fuel, wages and other operating costs while directing available cash towards the ATO debt.
However, invoice finance does not usually refinance tax debt directly. Its main purpose is to improve the timing of cash flow. Fees, customer concentration, invoice eligibility and payment arrangements should all be reviewed.
7. Consider an Asset Sale and Leaseback
An asset sale and leaseback arrangement may allow a transport business to sell an eligible unencumbered truck, trailer or piece of equipment to a financier and lease it back.
This can release capital while allowing the business to continue using the asset. The released funds may then be used for an approved business purpose, such as addressing tax debt or supporting working capital.
However, this strategy will not suit every fleet. An asset that is already heavily financed may have limited available equity. Operators should compare the amount released with the new repayments, fees and total finance cost.
Where fleet assets are involved, operators can also explore Xpress Finance’s truck finance options.
8. Combine ATO Debt Refinancing with Working Capital
Paying the ATO may not solve the underlying reason the debt developed. For example, a transport business may still be affected by slow-paying customers, rising fuel costs or unexpected repairs.
Where appropriate, ATO debt refinancing may be combined with a separate working capital finance solution. This could provide a buffer for operating expenses while the business returns to a more stable position.
Any additional funding should have a clear purpose and repayment plan. Otherwise, the operator may increase its overall debt without fixing the underlying cash-flow problem.
9. Consider Small Business Restructuring
Small Business Restructuring, or SBR, may be relevant when an eligible company is insolvent or likely to become insolvent and ordinary finance is not a suitable solution.
SBR is a formal restructuring process, not a standard business loan. Under the process, directors may retain control of the business while working with a registered restructuring practitioner to prepare a proposal for creditors.
Eligibility requirements and important legal consequences apply. Therefore, a transport business considering this pathway should obtain advice from a registered restructuring practitioner, accountant or insolvency lawyer as early as possible.
10. Speak with an ATO Debt Finance Broker
An ATO debt finance broker can review your business’s financial position before approaching lenders.
For an Australian transport business, the broker may assess:
- The amount owed to the ATO
- Current cash flow and business turnover
- Existing truck and vehicle repayments
- Available equity in the fleet
- Customer payment cycles
- Financial documents and BAS statements
- Planned truck or equipment purchases
- The business’s ability to afford a new loan
ATO debt does not necessarily mean a transport business is failing. It can reflect a mismatch between customer payment timing and the constant cost of keeping a fleet operating. Nevertheless, delaying action can increase cost and reduce flexibility. The right response begins with accurate figures, current lodgements and a realistic cash-flow plan.
If an ATO arrangement would place too much pressure on the business, commercial refinancing may be worth exploring.
Every transport business has a different cash-flow position, fleet structure and ATO liability. Xpress Finance can help you compare suitable finance options and structure repayments around your business needs.
Speak with an Xpress Finance broker today to explore your options.
Approval, pricing and loan terms are subject to lender assessment.
Frequently Asked Questions
Can a transport business get a loan with ATO debt?
Yes, some lenders may consider a transport business with ATO debt, depending on its cash flow and repayment capacity. An ATO debt finance broker can help compare suitable options, although approval remains subject to lender assessment.
Can a sole-trader truck driver apply for ATO debt finance?
Yes, some lenders may consider sole-trader truck drivers for ATO debt finance. Approval will depend on factors such as trading history, income, bank statements, ATO debt, existing truck finance and repayment capacity. Loan options and requirements vary between lenders.
Can I get ATO debt finance without owning property?
Unsecured or alternative-security options may be available for eligible businesses. Loan size, term, rate and documentation requirements may differ from a property-secured facility.