Can't pay your BAS, GST or VAT bill on time? What to do, step by step

Short answer: lodge or file the return on time anyway, pay what you can by the due date, and set up a payment plan for the rest before the tax office chases you. In Australia you can set up an ATO payment plan yourself in online services for business debts up to $200,000. In New Zealand you can apply for an instalment arrangement in myIR. In the UK you can set up a VAT Time to Pay plan online if you owe £50,000 or less, can pay it within 12 months and have filed all your returns. Interest still runs on what you owe, but asking early stops most penalties and keeps the tax office on your side. Then fix the reason it happened, because the next bill arrives while you are still paying this one.

The order to do things in

1. Lodge the BAS, GST return or VAT return by the due date, even with no money to pay it. Not lodging is a separate and avoidable penalty, and in Australia it changes what a director can do if a director penalty notice arrives (see below).
2. Pay part of it on the due date. Every dollar or pound paid now is one that interest and penalties cannot grow on.
3. Work out what you can pay each month from your cash, not from your profit. The plan has to sit alongside the next bill, so count both (the example below shows how).
4. Set up the plan online if you qualify, or call the tax office if you do not.
5. Pay every later bill in full and on time. All three tax offices can cancel the plan if a new return goes unpaid, and the whole debt then falls due at once.

What each tax office offers

	Australia (ATO)	New Zealand (Inland Revenue)	United Kingdom (HMRC)
Name	Payment plan	Instalment arrangement	Time to Pay arrangement
Set it up yourself	Online services, for business debts up to $200,000	myIR, for most tax types including GST and PAYE	Online for VAT if you owe £50,000 or less, can pay within 12 months, have no other plan and have filed every return
Otherwise	Phone the ATO; for larger debts expect to show your income, costs and assets	Phone or myIR message; they ask about your income and costs	Phone the VAT payment support line; they ask what you can pay each month and about your income, spending and savings
Interest	General interest charge (GIC), set each quarter, from the due date	Interest on the overdue amount	Late payment interest from the due date, even with an agreement
Penalties	Failure to lodge penalties if the BAS is late	Late payment penalties stop from the date the arrangement is agreed	A Time to Pay agreed early avoids VAT late payment penalties, but does not remove ones already charged

Check the current interest rate on the tax office’s own site before you choose a length. It changes, and a longer plan costs more.

In New Zealand, the bill that most often catches owners out is terminal tax after a good year, landing weeks after a bigger provisional tax instalment: provisional tax in NZ works an example through. The Australian version is the balance owing after the return when PAYG instalments were set from a smaller year, followed by bigger instalments: see PAYG instalments.

Australia: why lodging on time matters for directors

If a company does not pay its GST, PAYG withholding or super guarantee, the ATO can send its directors a director penalty notice and make them personally liable. What happens next depends on whether the company lodged:

• Lodged within three months of the due date (and super reported on time): directors have 21 days to pay, appoint a voluntary administrator or small business restructuring practitioner, or put the company into liquidation.
• Not lodged in time (a “lockdown” notice): the only way out of personal liability is to pay.

So the BAS goes in on time even when there is nothing to pay it with.

UK: what paying VAT late costs without a plan

Since April 2025, HMRC charges 3% of the VAT still unpaid on day 15, another 3% of what is still unpaid on day 30, and then 10% a year on what remains, on top of late payment interest. Owe £12,000 and do nothing for a month, and that is £720 of penalties before the daily charge starts. A Time to Pay plan agreed before day 15 avoids those penalties; interest still runs.

A worked example: a café in Perth

These figures are made up. A café’s quarterly BAS is due and comes to $18,600:

Line	Amount
GST on sales less GST on purchases	9,400
PAYG withholding from wages	6,200
PAYG income tax instalment	3,000
Total due	18,600

There is $11,000 in the bank, and $6,000 of that is needed for wages and suppliers next week. The owner lodges on time, pays $5,000 on the due date, and sets up a payment plan online for the other $13,600 over eight months: $1,700 a month plus GIC.

The trap is the next quarter. Trading has not changed, so the next BAS will be about $18,600 too, due in three months. To pay it in full (which the plan requires), the café has to put $6,200 a month aside for it. While the plan runs, tax takes $7,900 a month out of the café’s cash, not $1,700.

If the café cannot find $7,900 a month, the plan only moves the problem three months down the road. That is the point to look at why the money ran out (prices, wage cost, customers paying late, drawings taken from the GST) and to talk to an accountant before the next due date, not after.

Why the money wasn’t there

Owners rarely cannot pay a tax bill because the business lost money that quarter. Usually the tax was collected but spent:

• GST or VAT sat in the bank and looked like spare cash. It is owed from the day the customer pays you. How much to set aside for tax shows how to move it out every week.
• Profit went into stock, debtors or loan repayments, which do not reduce the tax. Profit in Xero but no cash in the bank walks through where it goes.
• The owner paid themselves from the whole balance. How much can I pay myself takes the tax off first.

Where Xero shows what you owe

1. The GST or VAT liability account on the Balance Sheet shows what has built up since the last return. The BAS report guide explains where each figure on the activity statement comes from, and the Xero VAT return guide does the same for the UK’s nine boxes (the GST return guide for New Zealand).
2. PAYG Withholdings Payable (AU) or the PAYE liability (UK, NZ) shows the wage tax not yet paid.
3. Record the plan payments against the tax liability account, not as a new expense, so profit is not counted twice. If the tax office adds interest, ask your bookkeeper how to code it: in Australia GIC is no longer tax-deductible for income years starting on or after 1 July 2025.
4. Forecast the next bill. Put the plan payments and the next due date in a 13-week cash flow forecast to see whether both fit.

Common mistakes

• Not lodging because you cannot pay. That adds a penalty and, for Australian companies, can turn a director penalty notice into a lockdown one.
• Waiting for the tax office to call. A plan agreed before the due date, or soon after, is cheaper and easier to get.
• Agreeing to a monthly figure you cannot keep. Missing a plan payment, or a new bill, can cancel the plan.
• Borrowing at a higher rate to pay it without comparing the cost. A payment plan is often cheaper than a short-term business loan; cash flow loans compares them.
• Forgetting the next bill while the plan runs.

Common questions

What happens if I can’t pay my BAS on time? Lodge it on time anyway, pay what you can, and set up a payment plan for the rest. The ATO charges the general interest charge on the unpaid amount from the due date. Not lodging adds a failure to lodge penalty, and for a company it can make directors personally liable for the GST and PAYG withholding.

Can I set up an ATO payment plan online? Yes, for business debts up to $200,000, through ATO online services or your tax agent. For larger debts, or if the online option is not offered, phone the ATO and be ready to show your income, costs and assets.

Does a payment plan stop interest? No. The ATO, Inland Revenue and HMRC all keep charging interest on the unpaid amount until it is paid. Inland Revenue stops late payment penalties once an instalment arrangement is agreed, and an HMRC Time to Pay agreed early avoids VAT late payment penalties.

Can I set up an HMRC Time to Pay for VAT online? Yes, if you owe £50,000 or less, can pay it within 12 months, have no other payment plan or debt with HMRC, and have filed all your VAT returns. You cannot use the online service on the Cash Accounting or Annual Accounting schemes, or if you make payments on account.

What if I miss a payment plan instalment? All three tax offices can cancel the arrangement, and the whole balance can become due at once, with penalties. Contact them before the payment date if you know you cannot make it.

Should I take out a loan to pay my tax bill? Compare the loan’s interest and fees with the tax office’s interest rate first. A payment plan is often the cheaper option, and it does not put a new lender in front of your other bills.

See next month’s tax coming, every Monday

ReportPilot reads your Xero figures and sends a short plain-English email every Monday, with a 24-month dashboard behind it. It covers the cash in the bank against the end of last month, sales and profit against last month and the same month last year, money owed to you that is past due, and bills due in the next two weeks against your cash. It does not work out your tax, set up payment plans or talk to the tax office for you. It asks Xero for read-only access, and there is a 14-day free trial with no card.