ATO Payment Plans: How They Work and How to Set One Up
In Australia, an ATO payment plan lets you pay a tax debt in weekly, fortnightly or monthly instalments over the shortest period you can manage, starting with an upfront payment. If you owe $200,000 or less you can usually set one up yourself in ATO online services. Interest keeps compounding daily on the balance for the life of the plan, and the debt has to be assessed first, so an unlodged return gets lodged before anything can be arranged.
A tax bill you can’t pay in one go is a cash flow problem, and the ATO treats it as one. An ATO payment plan splits the debt into weekly, fortnightly or monthly instalments, with something paid up front, over the shortest period you can manage. Owe $200,000 or less and you can set one up yourself in ATO online services without speaking to anyone.
What the plan does not do is stop the clock. General interest charge keeps running on the whole balance for the life of the plan, compounding daily, at 11.51% a year for the October to December 2026 quarter. Since 1 July 2025 none of that interest is deductible, so every month you add to the plan is paid for at the full rate. The length of the plan is the cost decision, and it is yours to make before you submit it.
Here is how the plan works, how to set one up, what it costs, and how to keep it alive.
After 30 June 2027 the ATO will no longer accept credit card payments. A plan set up now on a two-year schedule runs past that date, and a plan still linked to a credit card then may move into arrears or default. Set the direct debit from a bank account or debit card from the start. The upfront payment and choosing the instalments covers the set-up details.
How an ATO payment plan works
A payment plan is an agreement with the ATO to pay an assessed tax debt in instalments. In the ATO’s own words on its payment plans page, the debt is broken into smaller amounts “spread over the shortest possible fixed period of time”, paid weekly, fortnightly or monthly until the balance is cleared, and every future tax debt still has to be paid in full and on time. The plan starts with an upfront payment, and the instalments follow by direct debit. It is not a pause, a discount or a negotiation of the amount. What you negotiate is the pace.
The plan also needs something to attach to. It is for tax the ATO has assessed, so a return that has not been lodged has no amount to put on a plan, and nobody can arrange one for it. Holding a return back because the bill will be unaffordable gets this backwards. The debt exists either way, and the unlodged return adds a failure-to-lodge penalty of up to five penalty units, $1,820 at the current $364 unit. If you are years behind on tax returns, the order is lodge, read the assessment, then arrange the plan. Not paying and not lodging are different problems with different consequences, and the plan solves only the first.
Eligibility is at the ATO’s discretion. Its page says you “may be eligible” if you are experiencing financial difficulties, and that you may not get a plan “on the terms you suggest or at all”.
Who can set one up, and how
Owe $200,000 or less and you can usually set the plan up yourself, in ATO online services or through the ATO’s self-help phone line. Everything else is a call to the ATO’s lodge and pay enquiry line.
Online in ATO online services
Individuals and sole traders log in through myGov with the ATO linked, then go to Tax, Payments, Payment plans. A company or trust uses Online services for business, under Accounts and payments. Each account needs its own plan: an income tax debt and an activity statement debt cannot share one, so take the exact balance for each from its latest notice rather than adding them together.
The screen proposes an upfront amount and suggested instalments, described by the ATO as amounts “that have been manageable for clients with similar circumstances to yours”, and lets you move both up or down within limits. Online services take one plan at a time, so a second account’s debt waits until the first plan is submitted.
When it has to be a phone call
The ATO’s list of when a plan has to be set up by phone is short. You phone the lodge and pay enquiry line if you:
- owe $200,000 or more
- tried online or the self-help line and were not successful
- need to renegotiate a plan you already have
- need extra support because of significant financial hardship
- are insolvent, bankrupt or in a dispute with the ATO
- need more than two years to repay.
Two history triggers can also send you there: a warning of firmer recovery or legal action in the past six months, or two or more plans defaulted or cancelled in the past 12 months.
On the call the ATO asks why you cannot pay by the due date, what is in your bank accounts and lines of credit, your income against the instalments you are proposing, your expenses and your assets. Arrive with those figures worked through the Moneysmart budget planner the ATO points callers to. A declined online attempt is a routing to this call, not a refusal of a plan.
The upfront payment and choosing the instalments
The ATO expects something now and the rest as fast as you can manage. It gives you an upfront amount and suggested instalments, both tuned to the shortest period, and you can vary each “above or below the amounts provided, up to certain values”.
The ATO’s payment plan estimator works out the upfront amount, the minimum repayment, how quickly the debt could be cleared and an estimate of the interest. It does not handle super guarantee charge debts, which go through the enquiry line.
Two years is the shape of a normal plan. Anything longer is a phone conversation, and once a plan runs past 24 months the instalment changes you can make online stop. A smaller instalment means a longer plan, and a longer plan is paid for at the full compounding rate, which the next section puts a number on. A debit that falls on a weekend or public holiday is processed on the next business day and is not treated as late.
- Direct debit from a bank account or debit card, with SMS or email reminders turned on
- An instalment date a few days after your money usually lands
- One plan per account, with the exact balance from the latest notice
- Cancel the plan in online services if you pay it off early, or the debits keep coming
- A credit card for a plan that runs past 30 June 2027
- Two accounts added together into one figure
- An instalment that leaves nothing for the BAS or instalment notice due next quarter
- A term past 24 months on the assumption you can adjust it online later
What a payment plan costs in interest
General interest charge applies to any tax still unpaid after the day it was due, and a payment plan does not change the due date, so the charge keeps running on whatever is outstanding until the last instalment clears. It compounds daily. The ATO sets the rate each quarter and publishes it in its GIC rates table: 11.51% a year for October to December 2026, up from 11.43% the quarter before.
The rate is only half the cost. GIC used to be deductible, so part of it came back at return time. Interest charged on or after 1 July 2025 is not deductible at all, a change covered in are accountant fees tax deductible alongside the costs that still are. A plan’s interest is now paid in full from after-tax money.
The ATO can remit GIC on request, case by case. The Tax Ombudsman’s March 2026 review of GIC remission found those decisions inconsistent and poorly explained, noted that tax law requires interest to compound daily even under an approved plan, and recommended up-front interest-free terms for people who keep to a compliant plan. The ATO agreed to every recommendation and is exploring up-front remission for the period of a payment plan, planned for the second quarter of 2026-27. The change is under way, and a plan set up today cannot rely on it.
The interest-free plan for activity statement debts
A small business with an overdue BAS debt can get a different deal. On the ATO’s interest-free payment plan page, the plan runs by direct debit over 12 months, GIC is still charged, and “as long as you maintain your payment plan” the interest is remitted automatically as it appears on the account. Keep every instalment and the plan costs nothing beyond the debt.
The eligibility list is the ATO’s own:
- annual turnover under $2 million
- recent activity statement amounts of $50,000 or less, overdue for up to 12 months
- a good payment and lodgement history, with no more than one plan default in the last 12 months and no outstanding activity statement lodgements
- no finance available through normal business channels, such as a bank loan
- a business that can show it is viable going forward.
It covers activity statement debt only, so an income tax bill sits on an ordinary plan beside it. An existing activity statement plan can be converted by phoning the business enquiry line: the ATO cancels the old plan and the interest-free period starts from the date the new one begins.
For a GST-registered sole trader this is the plan worth asking about by name. BAS debt tends to arrive because the GST collected through the quarter was spent as income, and the next of the BAS due dates arrives on schedule either way.
Keeping the plan alive: active, arrears, default
A plan stays active while two things hold: every instalment lands by its date, and every new obligation that falls due during the plan is lodged and paid on time. Miss either and the plan does not fail straight away. The ATO’s managing your payment plan page describes three statuses, and the middle one is the lifeline.
The arrears letter goes to your myGov inbox, or to your tax agent if your correspondence goes there, and names the minimum amount to pay now to stop the plan defaulting. After a default the ATO can take firmer action to collect the full balance, and the way back is a phone call: its page says the options “may include re-negotiating a payment plan”.
Refunds and credits do not help with the instalments. Any refund or credit you become entitled to during the plan is offset against the debt automatically, which shortens the plan, and it does not replace the instalment due that month. Extra voluntary payments are allowed any time.
Changes need notice: one business day before the debit for a debit card, three business days before for a bank account, and no online changes at all once the plan is past 24 months. Switching between a card and a bank account means cancelling the plan and setting up a new one, and cancelling with a debt still owing invites the firmer action the plan was holding off.
New obligations during the plan get paid in full or put on a separate plan of their own. The quarterly BAS and any PAYG instalment notice keep their usual small business tax calendar dates, and a missed one puts the main plan into arrears as surely as a missed instalment does.
Where a tax agent fits
An agent cannot make the ATO accept terms it would otherwise refuse. A debt-negotiation firm selling a better deal is selling preparation and a phone call. What a registered tax agent changes is the work around the plan.
For anyone behind, the lodging is the step that has to exist before a plan can. On overdue tax returns each outstanding year is the standard price less a discount: a personal year is $135, a sole trader year $297 with the personal return included, a company year from $352, with outstanding BAS at $150 each, quoted as one fixed figure before any work starts. Once the assessments issue, the agent can set the plan up through Online services for agents, or make the phone call with the figures in order.
The sequence for a reader with a bill in hand is short. Lodge whatever is outstanding, read the notice of assessment for the exact figure, run the estimator against what you can actually pay each month, and set the plan up the day the assessment issues, from a bank account rather than a card. The interest started on the due date either way, so the day the plan starts is the day the balance starts falling.
Quick answers
Does the ATO charge interest on a payment plan?
Yes. General interest charge keeps accruing on the unpaid balance for the life of the plan and compounds daily, at 11.51% a year for October to December 2026 with the rate reset each quarter. A plan changes when you pay, not what the debt costs. The exception is the interest-free plan for small business activity statement debts, where GIC is charged and then remitted automatically while the plan is kept.
Can I set up an ATO payment plan if I haven't lodged my tax return?
Not for that year. A payment plan is for tax the ATO has assessed, and an unlodged return has no assessed amount to put on it. Lodge first, then arrange the plan once the notice of assessment shows the figure. Holding a return back because you cannot pay adds a failure-to-lodge penalty to a debt that was going to exist anyway.
What happens if I miss a payment on an ATO payment plan?
The plan usually moves into arrears first, and the ATO sends an arrears letter with the minimum amount to pay now to bring it back on track. If that is ignored, or an instalment or a new tax obligation goes unpaid, the plan defaults, the whole overdue balance becomes payable immediately and the ATO may take firmer action. After a default you can still phone to renegotiate.
Can I get a new payment plan after cancelling or defaulting on one?
Usually, but not always online. Two or more plans defaulted or cancelled in the past 12 months means phoning the lodge and pay enquiry line, where the ATO asks about your income, expenses, assets and bank position before agreeing to terms. Eligibility is at the ATO's discretion, so a second plan can come with a larger upfront payment or a shorter term.
Will my tax refund go towards my payment plan?
Yes. Any refund or credit you become entitled to is offset against the debt automatically, and it does not count as an instalment. The scheduled payments continue as agreed, so the refund shortens the plan rather than replacing a payment.