What the plan is
The ATO describes a payment plan as a way to break what you owe into smaller amounts, paid by instalment over “the shortest possible fixed period of time”. It is not automatic. The ATO says it considers many factors, and that you may not be eligible on the terms you suggest, or at all.
Two things carry on underneath the plan. Any future tax debts still have to be paid in full and on time. And any refunds or credits you are owed are used to reduce the debt, which the ATO calls offsetting; an offset does not replace an instalment that is due.
The interest that keeps running
A debt on a payment plan keeps accruing the general interest charge, or GIC, and the ATO says it compounds daily. The longer the plan, the more interest is paid, which is why the ATO steers people toward the shortest period they can manage.
That is the annual rate the ATO lists for the October–December 2026 quarter, as at October 2026; the daily rate it lists is 0.03153425%. The rate is updated every quarter. See the ATO’s general interest charge rates for the current figure.
The ATO’s payment plan estimator works out an upfront amount, a likely minimum repayment, how quickly the debt could be paid, and an estimate of the interest. The ATO notes it can’t be used for super guarantee charge debts.
Three ways a plan is set up
Which route applies depends mostly on how much is owed and on your history with the ATO. A registered tax or BAS agent may also be able to set one up for you.
| Route | When the ATO says it applies | What to have ready |
|---|---|---|
| ATO online services | You owe $200,000 or less. Individuals and sole traders use ATO online services through myGov; businesses use Online services for business. One plan at a time can be set up this way. | A myGov account linked to the ATO, for individuals. |
| Self-help phone line | You owe $200,000 or less. One plan at a time. | Your TFN or ABN, and the full amount owing for each account, kept separate rather than added together. |
| Lodge and pay enquiry line | You owe more than $200,000, the other routes didn’t work, you need to renegotiate, you need more than 2 years, or you are insolvent, bankrupt or in dispute, among other cases. | Proof of identity and the amount owing. The ATO says it will ask why the bill can’t be paid on time and about bank balances, income, expenses and assets. |
The ATO also says it will ask more questions if you have had a warning of firmer or legal action in the past 6 months, or have defaulted on or cancelled 2 or more plans in the past 12 months. Income tax and activity statement debts need separate plans. For the call itself, the ATO points to Moneysmart’s budget planner as a way to work out a suitable payment proposal. Phone details are on the ATO’s contact page.
Keeping a plan in good standing
The ATO’s pages describe these as the things that keep a plan alive:
- Lodge everything on time, and pay new tax debts in full and on time, or put a new debt on its own separate plan. If not, the ATO says the plan may default and the full overdue balance becomes payable at once.
- Instalments can be paid by direct debit from a bank account or a card, set up at the same time as the plan.
- After 30 November 2026 the ATO will no longer accept credit card payments. A plan linked to a credit card has to move to another payment method, or later payments will fail and the plan may fall into arrears or default.
- Changes to an instalment’s date or amount need notice: at least 1 business day before it is due for a debit card, and 3 business days for a bank account.
- Changes can’t be made online if the plan already runs past 24 months, or if the change would take it past 24 months.
- Extra payments can be made at any time, and a plan paid off early has to be cancelled to stop the remaining direct debits.
SMS or email reminders for each instalment can be switched on when the plan is set up.
Two other kinds of plan
Interest-free, for some small businesses
A business may be able to pay overdue activity statement amounts over 12 months by direct debit. The ATO’s conditions include: turnover under $2 million; recent activity statement amounts of $50,000 or less, overdue for up to 12 months; no outstanding activity statement lodgments; a good payment and lodgment record (no more than one payment plan default in the last 12 months); no access to normal business finance; and ongoing viability. GIC is still charged but is remitted while the plan is kept.
Secured plans
Where the ATO and a taxpayer can’t agree, the ATO may consider an offer of security in exchange for more time or instalments. Its preferred securities are a registered mortgage over freehold property or an unconditional bank guarantee from an Australian bank.
If a plan isn’t kept
Cancelling a plan while a debt is still overdue may lead the ATO to take what it calls firmer action. It says it is more likely to do so when people repeatedly default on agreed plans or ignore reminders. Firmer action may include a garnishee notice, which requires someone holding your money, such as an employer or bank, to pay it to the ATO; a director penalty notice; or disclosing a business tax debt to registered credit reporting bureaus.
The ATO also has a page on firmer action, and its payment plan page links to support for people facing hard personal circumstances.