By For years, paying the ATO by credit card has been the easy option for plenty of Australian businesses. A practice lodges its BAS, puts the amount on the card and gets up to 55 days before the money actually leaves the account. It might even earn some rewards points along the way. Any tax accountant will tell you it’s been a popular habit, and small business bookkeepers see it every quarter. But that option ends after 30 June 2027. An accountant in Northcote or anywhere else in Melbourne will agree the real question isn’t “How else can we pay?” BPAY and direct debit are simple. The real question is how to fund the gap the card used to cover, and what that’ll cost.
Comparing the ATO payment options
Here’s how seven funding options compare for the same practice and the same $45,000 bill. Some cost less than expected, and one leaves the business better off.
Option 1: Business overdraft
At around 11% a year, 90 days of interest costs about $1,221 (45,000 × 0.11 × 90/365). Business interest is generally deductible, so the after-tax cost is about $916. Overdrafts are flexible, but many practices don’t have enough headroom, and facility fees may apply whether the overdraft is drawn on or not.
Option 2: Business line of credit
At around 9%, interest comes to about $999, or about $749 after tax. It’s often the cheapest borrowed option for established practices with good security. The catch is that approval can take weeks, so it has to be set up well before a BAS falls due.
Option 3: Specialist tax funding loan
At around 12% plus a $250 establishment fee, the total is about $1,582, or about $1,186 after tax. These loans are quick and convenient, and more lenders are likely to offer them as the cut-off gets closer. They usually cost more than bank finance, so it’s worth reading the fee schedule closely.
Option 4: ATO payment plan
The general interest charge (GIC) is the interest the ATO charges on overdue amounts. At an indicative 11% compounding daily, it comes to about $1,238 if the full balance stays unpaid for 90 days. Since 1 July 2025, the GIC hasn’t been deductible, so the after-tax cost is still about $1,238. Paying in instalments lowers the real figure, but relying on payment plans quarter after quarter can also count against a business when the ATO assesses its compliance risk.
Option 5: Third-party card payment service (after 30 June 2027)
These services let businesses keep paying by card, with surcharges of around 1.5% to 2%, or $675 to $900. The fees are generally deductible, so the after-tax cost is about $506 to $675, provided the card is cleared on time. Small business bookkeepers often point out that processing delays can push a payment past its due date, so it’s smart to check that the provider is reputable and to confirm when the ATO actually receives the money.
Option 6: Self-funded tax holding account
This option costs nothing. At an indicative 4%, $45,000 held for 90 days earns about $444, or about $333 after tax. It’s the only option that leaves the business better off. It takes discipline, but it removes the funding problem altogether.
What the numbers show
Here’s how the options rank by indicative after-tax result for one quarter:
- Tax holding account: a gain of about $333
- Third-party card service: a cost of $506 to $675, but only if the card is cleared on time
- Line of credit: a cost of about $749
- Overdraft: a cost of about $916
- Tax funding loan: a cost of about $1,186
- ATO payment plan: a cost of about $1,238, none of it deductible
Across four BAS cycles, the gap between the best and worst options can top $6,000 a year for a practice of this size. The card’s rewards and interest-free period were never really free. Their cost was just hidden inside the card arrangement.
These figures are indicative only. The ATO resets the GIC every quarter, and lender rates, surcharges and deposit rates change often. Check the ATO website for current rates and treat this scenario as a guide rather than a quote.
Plan now for small business ATO tax payments
Most practices get the best result by combining options. A tax holding account does most of the work, and a line of credit stays in place for seasonal shortfalls. A good tax accountant can model this using the business’s real cash flow, and small business bookkeepers can set up the regular transfers that make it stick. For Melbourne practices, talking to an accountant in Northcote or nearby well before 30 June 2027 means the new setup will be ready before the last card payment goes through.