A payment arrangement can buy time. But it does not by itself resolve director exposure. Here is what every director with tax debt should understand before relying on one.
The most important thing to read first
If you have received a Director Penalty Notice, a payment plan will not protect you from personal liability. This is the single most common and costly mistake directors make. Read the section on DPNs and payment plans below before doing anything else.
A tax office payment arrangement is an agreement to repay an outstanding tax debt in instalments over an agreed period. Availability and terms depend on the debt, compliance history and circumstances.
A payment arrangement does not reduce the underlying debt. Interest or other charges may continue to apply, and the current terms should be confirmed with the tax office or your tax adviser before you rely on an arrangement.
Used appropriately, a payment plan can provide breathing room while a business stabilises. Used as a substitute for proper restructuring advice, it can make a bad situation worse.
The process depends on the size of the debt and the type of tax obligation involved.
Available online
Check the current serviceThe tax office may make online arrangements available for eligible debts. Confirm the current eligibility, repayment options and information requirements before proceeding.
More complex or material debt
Prepare for a detailed reviewThe tax office may assess the company's financial position and request supporting documents. Obtain advice first if the business is under broader financial stress or director exposure is possible.
Super guarantee charge (SGC) debt
Check the separate consequencesSGC has distinct reporting and DPN-remission rules. Confirm the position specifically rather than assuming a general payment arrangement resolves the director-risk issue.
A payment arrangement is not a substitute for a solvency and director-exposure assessment. The tax office may consider the company's circumstances, compliance and capacity to pay. Factors to prepare include:
Your compliance history and whether required reporting is current
Your financial position and realistic capacity to make each payment
The nature of the debt and any employee-entitlement issues
Whether a Director Penalty Notice has already been issued - this changes the calculus significantly
This is the section that matters most. If you have received a Director Penalty Notice - or if one is likely - a payment plan will not protect you from personal liability.
A DPN can make a director personally liable for specified unpaid PAYG, GST or super guarantee charge liabilities. For relevant standard DPN liabilities, the tax office lists these remission options within the 21-day period:
Pay the debt in full
Place the company into voluntary administration
Appoint a small business restructuring practitioner (for eligible companies)
Begin winding up the company
Agreeing to a payment plan is not on this list. A payment arrangement does not itself remit a director penalty. For late or unreported liabilities, payment in full is the tax office's stated remission path. Obtain urgent advice on the notice and reporting history before relying on an arrangement.
If you have received a DPN, call us before doing anything else. The 21-day window is not a negotiation period. It is a hard statutory deadline.
Call Rebound Advisory - 03 9131 8700Payment plans are not inherently bad. Used in the right circumstances, they are a legitimate and useful tool. They work well when:
Missing a payment typically cancels the arrangement. The ATO can then pursue the full outstanding balance immediately. Enforcement tools available to the ATO include:
Garnishee notices directed at your bank or debtors - funds redirected without court involvement
Offsetting personal tax refunds against the outstanding debt
Court proceedings, judgment, and forced asset sales
Bankruptcy proceedings if the debt exceeds $10,000
Departure Prohibition Orders preventing you from leaving Australia
If you anticipate difficulty meeting a payment, contact the ATO before the due date. They are more likely to vary an arrangement proactively than to reinstate one after it has been cancelled.
Does an ATO payment plan stop interest from accruing?
No. The General Interest Charge (GIC) continues to accrue daily throughout the payment arrangement at 10.65% per annum (January-March 2026 rate). From 1 July 2025, GIC is no longer tax deductible for most businesses, which significantly increases the real cost of carrying ATO debt over time.
Can the ATO refuse a payment plan?
Yes. The ATO is not obliged to grant a payment arrangement. They are more likely to refuse if lodgements are outstanding, if you have a history of broken arrangements, or if they assess the business as not viable. For larger debts, they may require detailed financial information before agreeing.
Can I negotiate the interest rate on an ATO payment plan?
In limited circumstances, the ATO can remit (waive) some or all of the GIC. This is not automatic and requires a formal application. Remission is more likely where the delay was caused by circumstances outside the taxpayer's control, such as natural disaster or serious illness. General financial difficulty is not typically sufficient grounds.
What is the difference between a payment plan and a payment arrangement?
They are the same thing. The ATO uses both terms interchangeably. Formally, the ATO refers to these as 'payment arrangements' in its legislation and correspondence, but 'payment plan' is the common usage.
Brendan Richards
Founder & Senior Advisor, Rebound Advisory
Brendan has spent over 25 years in corporate restructuring and turnaround advisory, including senior roles at PwC, KPMG, and Ferrier Hodgson. He has advised directors across construction, manufacturing, retail, agribusiness, and professional services on navigating ATO debt, Director Penalty Notices, and Safe Harbour plans.
Dealing with ATO debt? Talk to us first.
A free 30-minute call with Brendan or Claire will clarify your position, your options, and whether a payment plan is the right tool - or whether you need something more.