Managing Tax Debt and Your Home Loan: What You Need to Know
The information provided in this article is general in nature and is not intended to be financial advice. We always recommend you seek your own, independent financial advice which can take into consideration your specific circumstances.
If you’re currently dealing with tax debt, you’re not alone. Many Australians, particularly self-employed individuals and small business owners, can find themselves owing money to the Australian Tax Office (ATO) — sometimes unexpectedly, which can be stressful and often leave people feeling overwhelmed.
The good news? Having a tax debt doesn’t mean you have to put your dreams of home ownership or refinancing on hold. In fact, depending on your situation, you may be able to consolidate your tax debt into a home loan to help get your finances back on track.
At Bluestone, we specialise in helping borrowers manage complex financial situations, including ATO debts, with our loan options. Here’s what you need to know about tax debt, how it can impact your mortgage options, and the solutions available to you.
What is tax debt and why do I owe the ATO?
Tax debt occurs when you owe money to the ATO after filing your tax return or Business Activity Statement. It can arise for several reasons, including:
- Underpayment of income tax
- Missed GST or PAYG instalments
- Late lodgement penalties
- Unexpected business income fluctuations
- Administrative errors
For self-employed borrowers and business owners, fluctuating income and complex financial structures often make it harder to stay on top of ATO obligations — and once a tax debt builds up, it can feel overwhelming.
When it comes to managing tax debt, three common issues Australian borrowers might face are spouse liability, bankruptcy, and accessing superannuation. Generally, tax debt belongs to the individual, but if you share joint assets with a spouse who owes the ATO, there’s a risk those assets could be affected. Bankruptcy can also complicate things — while it may wipe some debts, tax obligations often survive and bankruptcy stays on your credit file for years, making future borrowing harder.
Accessing super to pay tax debt is another question many borrowers ask, but there are strict rules that apply to accessing it and there are potentially significant implications on the balance of their super upon retirement, making this option unpopular and ill-advised.
In many cases, consolidating tax debt into a home loan is a simpler, faster solution — helping those with tax debts to take back control without jeopardising their financial future. In all cases, we recommend you obtain independent financial and taxation advice which can take into account your particular circumstances, so you can find out what is best for you.
What are my options to repay tax debt?
If you have an outstanding tax debt, the ATO offers several repayment options, including ATO payment plans where you pay off your debt over time in instalments. However, while this is helpful in managing your repayments, these plans have three possible drawbacks:
- You still incur interest charges
- You often have strict repayment terms
- Your ability to borrow from traditional lenders could be impacted
Another popular option which you might be eligible for is debt consolidation, where you bundle your tax debt into your home loan. This might:
- Lower your overall monthly repayments
- Streamline your finances into one manageable loan
- Potentially give you access to better rates than a standard personal loan
And with Bluestone’s near prime and specialist home loans, you might be eligible to consolidate unlimited ATO debt — even if your financial situation is a little more complex than average.
How Bluestone helps borrowers with tax debt
At Bluestone, we understand that life doesn’t always follow a straight financial path. That’s why we offer flexible home loan options for eligible borrowers with tax debt, including:
- Unlimited debt consolidation: Conveniently roll ATO debts, credit cards, and other personal debts into your mortgage.
- Near Prime and Specialist loans: Designed for borrowers who don’t fit traditional lending criteria, including those managing tax debts.
- Personalised support: Our lending specialists work with you (and your broker) to find a solution that matches your circumstances.
Whether you’re looking to buy your dream home, refinance your mortgage, or simply tidy up your finances, Bluestone can make it easier to move forward with confidence — even if you have tax debt.
About Bluestone Home Loans
Why do so many people turn to us? We work with borrowers that traditional lenders often overlook. We offer more flexible solutions to help more Aussies get the loan that’s best for them.
The information provided in this article is general in nature and is not intended to be financial advice. We always recommend you seek your own, independent financial advice which can take into consideration your specific circumstances.
