Consolidate Australian Tax Office (ATO) debt

Can I consolidate my ATO debt to my home loan?

✅Yes.  Some niche players will lend up to 80% (value of property + ATO debt).  The loan must be less than 80% of the value of the property plus the ATO debt combined.

✅Must provide a reasonable explanation as to why you're late with your payments.

✅Must provide evidence that you can afford this new loan.  There are also low doc options.

Does my Credit File show ATO debt?

✅Yes.

✅To show on your credit file the debt needs to be more than $10,000 and overdue longer than 90 days without contacting the ATO to work it out.

✅This will hurt your credit rating.  There are still a couple of niche lenders that will not credit score in this space.

✅It's a good idea to have an accountant help you manage communication with the taxation office.

✅Sometimes refinancing your ATO debt into your mortgage is a good solution to get you back on track with one manageable monthly payment.

Must explain the reason for the tax debt

✅A lender will view you as less trustworthy if you are late lodging your tax returns.  Your ATO debt is a commitment that must be managed like any other repayment.

✅Most lenders will be reasonable if your accountant lodged your tax return incorrectly.

✅Capital Gains Tax from the sale of a property or asset is given more leeway as it is a one off situation rather than a systemic ongoing issue with your cash flow.

What if my tax returns aren't up to date?

✅There are some low doc loan options.  

✅People with overdue ATO debt often have poorly kept tax returns.  This reduces your options significantly for securing a mortgage.

✅Self employed borrowers can provide a BAS, accountants letter, or bank statements rather than a tax return.

What if the ATO takes legal action?

✅The ATO can be quite unforgiving for serial offenders who don't communicate a plan with them.  You should speak to you accountant about updating the ATO and managing your payment plan.  Ignore the ATO and the penalties can be severe.

✅The court may lodge a court writ or judgement against your credit file making it harder to borrow in the future.  Most main stream lenders will consider you a high risk client going forward.  It's important to enter into a repayment deal with ATO to prevent this from happening.

✅A court writ lasts 4 years on your credit file after it's fully paid.

✅A judgement will last 5 years on your credit file.

Can the ATO lodge a CAVEAT on my property?

✅Yes.  This will depend on the size of the tax debt and the amount of missed payments.  Your communication with the ATO is key.

✅A caveat can be placed on residential or commercial property.

✅It is how the ATO ensures you do not sell the property without paying the debt.

✅There are some niche lenders that will capitalise the ATO debt into your home loan to prevent a caveat on your property. 

Can I get a mortgage if I made a payment arrangement with the ATO?

✅Yes.  This will prove to the lender that you are a good bet and intend to honour your repayments.

✅Must provide a print out from the ATO portal showing your last 6 months worth of payments.  It should show no missed payments.

Why won't the major banks give me a mortgage?

✅Most major lenders strictly decline all borrowers with ATO debt.

✅It shows financial distress.  Adding a mortgage to somebody struggling to pay their ATO debt may be adding to a persons financial hardship.  Banks really don't won't to see you fail; and sometimes they are the voice of reason in a 'hot' housing market.

✅Statistics show that people with ATO debt are more likely to fall into other financial problems.

✅Failing to lodge tax returns or repay the ATO indicates low motivation to repay debt.  A bank will not want to deal with somebody who does not honour their repayments.  If you can't be trusted with little, then you can't be trusted with much - no judgement.  Clearly people sometimes fall on hard 'periods' in life and should not be included into this category.

✅A lender may be concerned that the ATO could make a claim against the property when sold, leaving the bank with a loss.

Get an accountant!

✅Your accountant will manage the communication between you and the ATO.

✅Set up a repayment plan & help you structure your cash flows to meet the commitment.

✅May advise you to capitalise this tax debt into your home loan to avoid ATO legal action.

I will help you consolidate your ATO debt into your mortgage.

Matthew Stack - Mortgage Broker

0423 237 242