These clients found us through a tradie community page, after seeing a few of our older clients recommend us. When they first sat down with us, they were up to their eyeballs in tax debt and their cash flow was stretched thin. Being self employed is hard, we get it. We are too!
It wasn't a case of not being able to manage it. There was just a lot going on. They were running a business, raising four small kids, and one of them was working a PAYG job on top of everything else. They were figuring it all out as they went, like most business owners do.
We're great at running our businesses. We're not expected to know every minute detail of tax and cash flow management, but the truth is we should. Because when it catches up with you, it affects more than just the business.
How ATO debt affects your borrowing
ATO debt is hurting borrowing capacity right across the board. Lenders factor in the monthly repayment plan, which eats into servicing, and they also look closely at it when assessing character and conduct. A tax debt on a payment plan can be enough for some lenders to step back altogether. Debt consolidation is one way to consider getting it cleared.
That was a real problem, because these clients had a dream. Sell their home and build the one they'd always wanted.
The land that wouldn't wait
They'd already found the block. It was off market, the seller wanted a short settlement, and they couldn't get the seller to agree to a subject to sale condition. As it turned out, that was lucky, because their home ended up taking four months to sell. If the land purchase had been tied to that sale, they would have lost it.
So we needed a way to buy the land before the house sold, with an ATO debt sitting in the middle of everything.
Building the roadmap
When we looked at their position properly, the picture was better than they thought. They had a lot of equity in their home, and without the hefty monthly ATO repayment plan and a couple of scraggly credit cards, their servicing actually looked good.
So we did what we do best. We built a plan, a structure and a roadmap to get them where they wanted to be.
The first step was consolidating the tax debt and those small loans into the refinanced home loan. Clearing the ATO debt got them halfway there on its own, because it freed up the cash flow they needed for servicing.
Next, we used that freed up cash flow and their equity to purchase the land. At this stage, both the debt consolidation and the land loan needed to go to an alt doc lender. That wasn't where we wanted them long term, but it was the right lender for that moment and it got them the land.
Then we waited for the home to sell so the debt could be cleared down.
Watching the numbers improve
While all of this was happening, we rolled into a new financial year. I jumped into a meeting with them to view their Xero management accounts and could see real improvement in the profit and loss. Pending the accountant's final accounts, I was confident we could get them back to a mainstream lender.
So we waited a little longer. The home sold and the debt came down. Their 2026 financials were completed, and when we reviewed the drafts, they were exactly what we needed. Servicing landed right where it had to be.
Meanwhile, the clients had been busy too, pulling together their building contract.
The dream build
We've just submitted their construction loan for their dream home, with an excellent mainstream lender offering really sharp pricing. From ATO debt and an alt doc loan to a mainstream construction loan, in a planned series of steps.
The first step doesn't always look like the best one
If you'd only looked at step one, going to an alt doc lender to consolidate tax debt might not have seemed ideal. But it was never meant to be the final destination. It was the first move on a roadmap to where they wanted to land.
Lending doesn't always go in a straight line. Sometimes it's jagged, and it takes a few moves to get you where you need to be. Knowing which move to make, and when, is what we're really good at.
If you've got tax debt holding you back from your next move, or you're not sure how your business numbers are affecting your borrowing, talk to one of our brokers. Make an Appointment
This case study is general information only and does not take into account your personal circumstances. Speak with your accountant or tax adviser about your tax position before acting.
