Turning a tax debt burden into growth capital
When a growing aviation services business found itself carrying over $2m in ATO debt, escalating GIC charges and facing limitations on future funding, it turned to Octet for a better solution. By adding a Term Loan with Debtor Finance and Trade Finance facilities, Octet helped the business eliminate its tax debt, improve cash flow and strengthen its funding position. The result was lower financial pressure, greater working capital flexibility and a stronger foundation for future growth.
$5m
Debtor & Invoice Finance
$2m
Term Loan
$400k
Trade Finance
Operating across multiple airports nationwide, this aviation services business plays a vital role in supporting airline operations through ground handling, passenger services and aircraft turnaround activities. With a large workforce, specialised equipment and demanding operational requirements, maintaining strong cash flow is critical to keeping operations running smoothly.
As the business continued to grow, increasing operating costs and working capital demands placed pressure on cash flow. While revenue remained strong, an accumulating ATO debt had become a growing concern.
The challenge
The company had accumulated a total ATO debt of over $2m, including $325,000 in General Interest Charges (GIC) and penalties.
Beyond the outstanding liability itself, the debt was attracting General Interest Charges (GIC) and penalties, increasing the cost of carrying the debt every month. Following legislative changes implemented in July 2025, the challenge became even greater, with interest incurred on ATO tax debt no longer tax deductible.
The business was far from alone. Most recently posted reports show Australian businesses owe the ATO more than $105 billion, of which $46.4 billion is considered collectable debt. This figure has almost doubles in the past five years. As the ATO continues to increase debt recovery activity, many otherwise healthy businesses are facing growing pressure to address outstanding tax liabilities before they impact cash flow and funding capacity.
For this business, the impact extended beyond the ATO balance. Carrying tax debt can negatively impact a business's ability to access additional finance, particularly for plant and equipment purchases. Despite having a strong customer base, established contracts and a proven operating model, the company found that the tax debt was limiting its funding options.
The business approached its existing lender seeking a solution but was unable to secure a facility structure that addressed both the tax debt and the broader working capital requirements of the business.
"Many business owners focus on the size of the tax debt, but the bigger issue is often the impact it has on cash flow, borrowing capacity and future growth. Tax debt can quickly become a handbrake on an otherwise healthy business."
Tony AhdoreDirector Working Capital Solutions Vic, SA, Tas - Octet
Recognising that the business needed more than a simple loan, Octet took a holistic view of the company's operations, cash flow cycle and growth objectives.
The goal was to create a funding structure that would not only eliminate the ATO debt but also strengthen working capital and support future expansion.
The solution
Octet structured a comprehensive working capital solution comprising:
- $5 million OctetDebtor finance facility
- $2 million Term Loan facility
- $400,000 OctetTrade finance facility
The cornerstone of the solution was the Term Loan facility, which enabled the business to immediately repay its entire ATO debt.
By clearing the debt, the company eliminated ongoing GIC and penalty charges and removed a significant obstacle to future funding opportunities.
Importantly, the business replaced a non-deductible ATO liability with a commercial funding solution where interest may be tax deductible when used for business purposes, creating a more cost-effective financing structure.
At the same time, the Debtor Finance facility unlocked cash tied up in outstanding invoices, providing access to working capital as sales were generated. The Trade Finance facility added further flexibility to support supplier commitments and operational requirements.
"Our approach wasn't simply to refinance a tax debt,” explains Tony. “We wanted to give the business a stronger balance sheet, better cash flow visibility and a funding structure that could scale with future growth.”
The result
The benefits were immediate.
With the business eliminating its $2m tax debt, it stopped the ongoing accumulation of GIC and penalties and improved its overall financial position.
Access to debtor finance improved cash flow certainty, helping management fund wages, suppliers and operational costs without relying on customer payment timing.
Most importantly, the company was no longer carrying a liability that could restrict future funding opportunities. With a stronger funding structure in place, management could focus on operational performance and growth initiatives rather than managing tax debt pressures.
Many Australian businesses are carrying ATO debt while simultaneously struggling with cash flow constraints and limited access to finance. With GIC continuing to accrue and interest on tax debt no longer tax deductible, the cost of maintaining tax debt has never been higher.
A tailored working capital solution can help businesses repay ATO debt, improve cash flow and create a stronger platform for future growth.
Whether you're carrying tax debt, experiencing working capital pressure or looking for a more effective funding structure, Octet's range of solutions — including Term Loans, Debtor Finance and Trade Finance — can help unlock the capital your business needs to move forward with confidence.
Talk to our working capital specialists today to explore how a tailored funding solution could help your business reduce financial pressure, strengthen cash flow and achieve its growth ambitions.
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Disclaimer: The above article content and comments are our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
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