Key Takeaways
- The ATO advises you should lodge your BAS by the due date even if you cannot pay the amount owing. Lodging on time protects your options and helps reduce unnecessary penalties.
- Lodging your BAS allows the ATO to assess your position and discuss payment arrangements.
- Not lodging your BAS can expose company directors to Lockdown Director Penalty Notices, making tax debts personally liable.
- Delaying lodgement rarely improves the situation and can make it worse.
- Once your BAS has been lodged, you can explore payment plans or tax debt loans to deal with the debt.
Every year we speak with Australian businesses facing BAS debts caused by slow paying customers, seasonal trading and unexpected expenses.
One question often follows. Should I lodge BAS if I can’t pay? The ATO’s advice is you should.
Many business owners assume there is little point lodging if they cannot pay the balance immediately. In reality, failing to lodge usually creates bigger problems than the unpaid debt itself. It increases penalties, limits your options with the Australian Taxation Office, and can expose company directors to personal liability.
If you are struggling with cash flow, your priority should be to lodge your BAS on time, understand your obligations, and then work on a solution for the debt.
Why You Should Always Lodge Even if You Can't Pay
The ATO expects businesses to lodge their BAS by the due date regardless of whether payment can be made.
Lodging tells the ATO exactly how much tax is owed. That allows your account to be updated and opens the door to discussing payment arrangements or alternative solutions.
Choosing not to lodge creates uncertainty. The ATO cannot accurately assess your liabilities, which makes enforcement action more likely over time.
Many business owners believe delaying lodgement gives them extra time to find the money. Unfortunately, it can have the opposite effect.
Instead of reducing pressure, late lodgement can result in:
- Failure to Lodge penalties.
- Increased ATO compliance activity.
- Director liability issues for company directors.
- Reduced flexibility when negotiating with the ATO.
If your business is experiencing temporary cash flow problems, lodging first and dealing with payment second could be a better approach.
The Penalty for Late Lodgement Versus Late Payment
Late lodgement means your BAS is submitted after the due date. Late payment means your BAS has been lodged but remains unpaid. These situations trigger different consequences.
Late Lodgement Penalties
The ATO can apply Failure to Lodge penalties when BAS statements are submitted after their due dates. These penalties are separate from the tax debt itself.
The penalty is calculated using penalty units. For small entities, the ATO applies one penalty unit for every 28 days, or part of 28 days, that your BAS remains outstanding, up to a maximum of five penalty units for each overdue BAS. Medium and large entities can have higher penalties because additional penalty unit multipliers apply.
These penalties apply separately to each overdue BAS, meaning multiple outstanding statements can result in multiple Failure to Lodge penalties.
The ATO has discretion to remit Failure to Lodge penalties in some circumstances, particularly where businesses have a good compliance history.
Late Payment Charges
If you lodge your BAS but do not pay the amount owing by the due date, the ATO generally applies the General Interest Charge (GIC) instead of a Failure to Lodge penalty.
Unlike the FTL penalty, GIC is calculated daily on a compounding basis. The ATO sets the GIC rate every quarter, and interest begins accruing from the day after your payment due date until the debt is paid in full.
The daily calculation is based on:
Outstanding tax debt × Daily GIC rate
Because the charge compounds daily, interest is applied not only to the original debt but also to previously accrued interest. This means the longer the debt remains unpaid, the faster the balance grows.
In some limited circumstances the ATO may remit part of the General Interest Charge where appropriate.
Why Lodging Still Matters
If you lodge your BAS but cannot pay, you’ll generally only incur the General Interest Charge on the outstanding balance. If you neither lodge nor pay, you risk both the General Interest Charge and Failure to Lodge penalties, while also increasing the likelihood of ATO compliance action and potential Director Penalty Notice issues.
Penalties at a Glance
| Situation | Consequence |
|---|---|
| Lodge and pay | No penalties |
| Lodge but don’t pay | GIC applies |
| Don’t lodge | Failure to Lodge penalties + GIC + potential DPN |
How Non Lodgement Triggers Lockdown DPNs
One of the most serious consequences of failing to lodge BAS is the potential impact on company directors.
Many directors are unaware that unpaid company tax obligations can eventually become personal debts.
Director Penalty Notices allow the ATO to recover certain company tax debts directly from directors.
Whether directors can avoid personal liability often depends on whether the required statements have been lodged on time.
What Is a Lockdown Director Penalty Notice?
A Lockdown Director Penalty Notice removes many of the options directors would otherwise have to avoid personal liability.
Where required BAS and related obligations remain unlodged for an extended period, directors may become personally responsible for the company’s tax debt.
Unlike ordinary Director Penalty Notices, a Lockdown DPN cannot usually be avoided simply by placing the company into administration or liquidation after the relevant deadlines have passed.
This is one reason tax professionals consistently recommend lodging first, even if payment cannot be made.
What Happens After You Lodge Your BAS?
If payment isn’t made by the due date, General Interest Charge generally begins accruing. Depending on your circumstances, the ATO may contact you regarding payment, or you can proactively request a payment arrangement. If the debt is substantial, seeking finance early may provide greater flexibility before recovery action escalates.
Options When You Can't Pay After Lodging
Lodging your BAS is the first step. The next priority is dealing with the debt before interest charges and ATO recovery action gain momentum.
The longer the debt remains outstanding, the more difficult it can become to manage your cash flow and maintain your relationship with the ATO.
Once your BAS has been lodged, take a realistic look at your financial position.
Consideration could be given to:
- Is the cash flow issue temporary or ongoing?
- Can the business repay the debt within a few months?
- Will upcoming customer payments be enough to clear the balance?
- Are there other debts placing pressure on the business?
- Is external finance likely to provide a better long term solution?
Answering these questions could help determine the most appropriate course of action.
Review Your Cash Flow
Many businesses fall behind with BAS because they have profitable operations but poor cash flow timing.
Large customers can take up to 90 days to pay invoices while GST and PAYG obligations fall due much sooner.
Preparing a detailed cash flow forecast allows you to identify:
- Expected customer receipts.
- Supplier payments.
- Payroll commitments.
- Loan repayments.
- Future BAS obligations.
A forecast also helps determine whether the current problem is temporary or whether more substantial funding is required.
Speak With Your Accountant
Your accountant can confirm the amount owing, ensure your BAS has been prepared correctly, and help identify any reporting issues before they become larger problems.
They can also advise whether amendments are required or whether there are legitimate strategies available to improve your cash flow position.
Seeking advice early generally provides more flexibility than waiting until recovery action has already commenced.
Avoid Falling Behind on Future BAS
One unpaid BAS can quickly become two or three if the underlying cash flow problem is not addressed.
Many businesses focus entirely on the current debt without planning for the next BAS due date.
Where possible, develop a plan that covers both the existing debt and future tax obligations. This helps avoid a cycle where each BAS simply adds to the previous balance.
Setting Up a Payment Plan or Seeking Finance
Once your BAS has been lodged, there are generally two broad ways to deal with the debt.
The first is working directly with the ATO.
The second is replacing the tax debt with business finance that better matches your cash flow.
The right option depends on your circumstances.
ATO Payment Plans
Eligible businesses may be able to enter into payment arrangements with the ATO after lodging their BAS.
These arrangements allow the outstanding balance to be repaid over time instead of in one lump sum.
While payment plans can be appropriate for some businesses, they are not always the best solution.
Repayments may still be difficult if cash flow is already under pressure, and interest charges can continue to apply.
Businesses with large tax debts may also find that ATO repayment terms are too short to be manageable.
When Business Finance May Be the Better Option
For businesses carrying significant tax debt, refinancing the ATO balance into a commercial loan may provide greater flexibility.
Instead of trying to satisfy the ATO’s repayment requirements, you may be able to access funding with repayments that better suit your cash flow.
Finance should be assessed against the total cost of borrowing compared with remaining on an ATO payment arrangement.
Depending on your circumstances, there are several funding options available.
An unsecured business loan allows you to pay out your tax debt without providing property or other assets as security. Approval is generally based on your business’s cash flow, trading history, and ability to service the loan. This option suits businesses that need funding quickly or do not have assets available as security.
If you own commercial or residential property, or other suitable business assets, a secured business loan may provide access to larger loan amounts, lower interest rates, and longer repayment terms. This can be a suitable option for businesses with significant ATO debt that want to reduce monthly repayment pressure.
An unsecured line of credit provides ongoing access to working capital rather than a single lump sum. You can draw funds when required, repay what you’ve used, and access those funds again as your balance reduces. This flexibility can help businesses manage both existing tax debt and future BAS obligations.
A business overdraft is another revolving funding solution that allows you to access funds through your business transaction account up to an approved limit. You only pay interest on the amount you use, making it a practical option for businesses with fluctuating cash flow throughout the year.
If your business owns unencumbered plant or equipment, equipment finance may allow you to release equity from those assets to pay outstanding ATO debt. This can provide access to funding without relying solely on your business’s cash flow.
An interest only loan can reduce repayments during an agreed period by requiring you to pay only the interest on the loan. For businesses experiencing temporary cash flow pressure, this can create additional breathing room while they consolidate debt and manage seasonal fluctuations in revenue.
Private lending can be suitable when traditional lenders are unable to assist because of tax debt, credit history, or complex circumstances. Private lenders can offer faster approvals and more flexible assessment criteria, making them a useful option when funding is needed urgently.
Frequently Asked Questions
The ATO’s advice is yes you should lodge your BAS. If you cannot pay your BAS by the due date, you should still lodge it on time. Lodging your BAS satisfies your reporting obligation and gives the ATO an accurate picture of your tax position.
Failing to lodge can lead to Failure to Lodge penalties, increased ATO compliance activity, and fewer options for resolving your tax debt. Lodging first also allows you to explore payment plans or business finance to manage the outstanding balance.
After your BAS becomes overdue, the consequences depend on whether you lodged your BAS and whether you paid the amount owing.
If you lodged your BAS but did not pay, the ATO will generally apply the General Interest Charge to the outstanding balance and may contact you to arrange payment. If the debt remains unpaid, the ATO can take further recovery action.
If you did not lodge your BAS at all, you may also incur Failure to Lodge penalties. For company directors, prolonged non lodgement can increase the risk of becoming personally liable for certain company tax debts through the Director Penalty Notice regime.
The ATO can apply Failure to Lodge penalties when a BAS is submitted after its due date.
The amount depends on factors including the size of your business and how late the BAS is lodged. Separate interest charges may also apply if there is an unpaid tax debt after lodgement.
Lodging on time, even without immediate payment, generally results in a better outcome than failing to lodge altogether.
For company directors, failing to lodge BAS can have serious consequences.
Extended non lodgement may result in a Lockdown Director Penalty Notice. This can make directors personally liable for certain company tax debts, including PAYG withholding, GST and certain other tax liabilities covered by the Director Penalty Notice regime.
Once a Lockdown DPN applies, many of the options that would otherwise protect directors are no longer available.
Directors who keep BAS lodgements up to date generally preserve more options if the company experiences financial difficulty.
Allowing BAS to remain unlodged for an extended period increases the likelihood that directors become personally responsible for company tax debts through the Director Penalty Notice regime.
If your company has fallen behind, obtaining professional advice as early as possible can make a significant difference.
Yes. If your business was registered for BAS reporting during the relevant period but had no reportable activity, you will generally still need to lodge a nil BAS.
Submitting a nil BAS confirms that there was nothing to report and keeps your lodgement history up to date.
Failing to lodge simply because there was no business activity can still lead to penalties.
There is no set period that allows you to leave a BAS unpaid without consequences.
Once the payment due date passes, the outstanding balance may begin accruing the General Interest Charge, and the ATO may commence debt recovery action if the debt remains unresolved. Depending on your circumstances, the ATO may contact you to discuss payment, issue reminders, offset tax refunds against the debt, or take stronger recovery action if the balance continues to grow.
If you cannot pay your BAS in full, the ATO advises it is generally better to lodge your BAS on time and address the debt as early as possible by arranging a payment plan or exploring suitable finance options.
Final Thoughts
Lodging BAS does not remove the debt, but it can protect your position. Lodging can reduce the risk of additional penalties, preserves more options with the ATO, and helps company directors avoid unnecessary exposure under the Director Penalty Notice regime.
After your BAS has been lodged, take action as soon as possible. Review your cash flow, speak with your accountant, and assess whether an ATO payment arrangement or business finance offers the most practical path forward.
The longer an unpaid BAS remains unresolved, the fewer options are typically available. Addressing the issue early gives your business the best chance of protecting its cash flow.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Get Help with Your Tax Debt
If your business has lodged a BAS but you cannot afford to pay the amount owing, you do not have to deal with the problem alone.
At Dark Horse Financial, we help Australian businesses access funding solutions for ATO debt, working capital, and cash flow challenges. We’ll work with you to identify lenders that fit your circumstances and your repayment capacity. The sooner you act, the more options are usually available.
Speak with our team today to discuss your situation and explore finance solutions that can help you clear your ATO debt.
