Overdue BAS and an ATO payment plan: what it costs and how to keep it alive

Falling behind on BAS is common and it is not a moral failing. The ATO would rather have a business that pays late than a business that closes. What it will not tolerate is silence.

But the advice most people get - "just call the ATO and set up a payment plan" - skips the part that matters. A payment plan is a finance product. Since 1 July 2025 it has been an expensive one. Here is what it actually costs, how to set one up, and the specific things that break a plan once it exists.

Lodging and paying are two separate obligations

This is the single most important thing on this page, and it is the thing most often got wrong.

Lodge your BAS on time even if you cannot pay a cent of it.

Failure to lodge attracts its own penalty, separate from the debt and separate from interest. That alone is reason enough. But the real reason is what happens to directors.

If a company lodges its activity statements on time and simply cannot pay, the ATO can issue a director penalty notice - and the director has 21 days to respond, with several ways out. If the company lodges more than three months after the due date, the ATO can issue a lockdown director penalty notice instead. There is no 21 days and no options: the director is personally liable for the PAYG withholding and super, full stop.

The difference between those two outcomes is a lodgement, not a payment. Lodging an unpayable BAS on time is one of the highest-value things a business in trouble can do, and it costs nothing.

What a payment plan actually costs

Unpaid tax accrues the general interest charge. For the July to September 2026 quarter the GIC annual rate is 11.43%, and it compounds daily. The rate is reset every quarter.

That number used to be softened by a deduction. It is not any more. GIC incurred on or after 1 July 2025 is no longer tax deductible.

That change matters more than the headline rate. Work it through:

• A company taxed at the 25% base rate pays 11.43% out of after-tax dollars. To compare it fairly against a deductible business loan, the equivalent pre-tax rate is about 15.2%.
• At the 30% company rate, the equivalent is roughly 16.3%.

That is more expensive than most business overdrafts and a good deal more expensive than an equipment or working capital facility. It is not the cheapest money in the room, and for years plenty of businesses treated it as though it were.

None of which means don't do it. It means make the comparison deliberately rather than defaulting to the ATO because the ATO is the one asking.

Setting one up

For most small businesses this is not a negotiation.

• Debts up to $200,000 can generally be arranged through ATO online services for business or the self-help phone line, without speaking to anyone, provided you meet the self-service eligibility rules.
• Above $200,000, or where the situation is complicated, you phone the ATO's lodge and pay line - or your registered BAS or tax agent does it for you.

If you do end up on the phone, they will want to know how the debt arose, what has changed, and what you can genuinely afford each month. A figure you have actually checked against your cash flow is worth more than an optimistic one, because an optimistic one defaults.

Six things that keep a plan alive

1. Make the first payment on time. It is the payment that confirms the plan exists. Missing it can void the arrangement outright.
2. Set up a direct debit, dated a few days before the due date. Not on it - a few days before, so a bank delay does not become a default.
3. Your next BAS is not covered by the plan. This is what kills more payment plans than anything else. The plan covers the debt as it stood, not what comes after. If you cannot pay the next one either, lodge it early and contact the ATO before the due date - the plan can often be varied to absorb it, but only if you ask first.
4. If you are going to miss an instalment, say so before you miss it. A call beforehand is a variation. A call afterwards is a default.
5. Defaults compound. After roughly three, the ATO moves from administering to investigating: requests for detailed financial information, and in some cases a garnishee notice to your bank, which takes funds without asking you first.
6. Keep lodging throughout. Being on a payment plan does not pause any lodgement obligation, and late lodgement while on a plan is the fastest way to lose the ATO's patience.

The $100,000 line

There is a threshold worth knowing about. The ATO can report a business tax debt to credit reporting bureaus where the business has an ABN, at least $100,000 overdue by more than 90 days, and is not effectively engaging with the ATO. A Notice to Disclose comes first, with 28 days to respond.

The relevant part: a payment plan you are complying with counts as effective engagement. The debt does not get reported. And where a business stops meeting the criteria - because a plan is now in place and being met - the record is removed from the credit file.

That is the strongest practical argument for getting a plan in place early rather than at the point of a final notice. Above $100,000, the plan is protecting your ability to borrow, get trade credit and win contracts, not just your relationship with the ATO.

When a payment plan is the wrong answer

Worth saying plainly, because most articles on this topic will not.

A payment plan works when the debt is a one-off - a bad quarter, a lost contract, a customer that did not pay - and the underlying business is sound. It formalises a temporary problem and gives you room.

It does not work when the debt is growing faster than you can pay it down. If each quarter's BAS is going onto the pile and the plan is only servicing history, the plan is not a solution. It is a slower version of the same outcome, with 11.43% compounding on top. That is a conversation with an insolvency specialist or a restructuring adviser, and it is a much better conversation to have early than late. We will tell you if we think you are in that position rather than quietly processing plans.

Where we fit

LINK Books is a registered BAS agent. What we do is keep the lodgements on time and correct, which is the part that protects directors and keeps options open, and we can deal with the ATO on activity statement matters on your behalf - including requesting deferrals and setting up plans.

Tax debt strategy and the wider tax position sit with the accountants at LINK Advisors, in the same building. Insolvency advice sits with a specialist, and we will point you at one.

If you are behind and it has got past the point of dealing with it yourself, catch-up bookkeeping is the service that untangles it - and a first conversation costs nothing.

General information only, current as at the date above, and not advice on your own circumstances. Rates and thresholds change - confirm with the ATO or your adviser before acting.