01
A separate GST account
Moving the GST portion out of the trading account as revenue lands means the money is there when the return falls due. It is the single most effective fix and it takes an afternoon to set up.
Why businesses fund a gap
A dated obligation nobody can move , arriving on a quiet month.
Tax dates are fixed and trading is not. The gap is entirely predictable, which is what makes it the most avoidable of the working capital problems on this site and one of the most common.
Last reviewed 8 September 2026
Indicative repayment
Weekly
$958/week
$4,153 /month $2,375 total interest
$35,000
$5,000 $500,000
9 months
6 months 5 years
16.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $35,000 scenario
9 months at 16.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
The short version
Five lines that cover it.
- The date is known and the money is not held. GST collected on behalf of Inland Revenue is frequently spent on trading before the return falls due, which is where most of this problem starts.
- Inland Revenue should be the first call. Instalment arrangements exist, they are ordinary, and approaching early produces a better outcome than approaching late.
- Borrowing to pay tax is legitimate. It is a cash-flow decision like any other, and it should be made by comparing the cost of the facility against the cost of not paying.
- The cheapest fix is a second bank account. Moving GST out of the trading account as it is collected removes the problem permanently and costs nothing.
- Indicative only. This is general information rather than tax advice. Amounts, dates and arrangements are matters for the accountant and for Inland Revenue.
Why it happens
Money that was never the business’s to spend.
GST arrives in the trading account with every sale and sits there indistinguishable from revenue. Over a two-month period a business turning over $300,000 has collected a substantial sum that belongs to Inland Revenue, and it has been available to pay wages, suppliers and rent throughout.
When the return falls due, the money has to be there. Where trading has been steady the business simply pays it out of the current month. Where trading has softened, the current month does not cover a liability accrued when things were busier, and the shortfall appears.
Provisional tax has the same shape with a longer lag. It is calculated on a prior year or an estimate, and it lands on dates that take no account of how the current year is going. A business having a poorer year than the last one pays instalments sized for the better one.
GST collected
On every sale
Held
Until the return
Frequently used
For trading in between
Due
On a fixed date
The order of operations
What to do first, second and third.
01
The accountant, before the date
A provisional tax position can sometimes be re-estimated where the current year is genuinely tracking below the basis the instalments were calculated on, and the options for doing so depend on the method the business uses. That is a conversation with the accountant and it has to happen before the date rather than after it.
02
Inland Revenue, early
Instalment arrangements are ordinary and are dealt with routinely. Approaching before a date is missed puts the business in a materially better position than approaching afterwards, and the department publishes what is available rather than deciding case by case in secret.
03
A facility, if it is still the best option
Where an arrangement is unavailable or its cost exceeds a facility, borrowing to pay is a straightforward commercial decision. It belongs third in this list rather than first, because the two steps above are frequently cheaper and are skipped out of discomfort rather than analysis.
The comparison
What each route costs on a $35,000 liability.
Illustrative on stated assumptions. Inland Revenue publishes its own rates and they change, so the figures below are shape rather than fact.
| Route | What it involves | Indicative cost basis |
|---|---|---|
| Pay on time | Cash is available | Nothing |
| Instalment arrangement | Agreed with Inland Revenue before the date | Use of money interest, and possibly reduced penalties |
| Short-term facility | A lender advances the amount | A fee or rate set by the lender |
| Receivables facility | Drawing against the ledger | Charged on the drawn amount for the days drawn |
| Pay late without contact | Nothing arranged | Interest and penalties, and a worse starting position later |
Indicative comparison. Inland Revenue publishes current interest and penalty settings, and an accountant should confirm any particular position.
The row that matters
Silence is the most expensive option on the table.
The worst outcome in the comparison above is the last one, and it is chosen more often than any of the others. A missed date with no contact attracts interest and penalties, and it makes a later arrangement harder to reach. Inland Revenue deals with businesses in difficulty routinely, and the difference between an early conversation and a late one is measured in both money and options. Where paying is going to be a problem, the call is worth making before the date rather than after.
The framing
Borrowing to pay tax is not a failure.
There is a persistent idea that funding a tax payment is a sign of a business in trouble, and it does more harm than good. A tax liability is an ordinary obligation with a date on it, and funding it is the same class of decision as funding stock or payroll. Where the cost of the facility is lower than the cost of not paying, borrowing is straightforwardly the right answer.
What the discomfort produces is delay, and delay is what makes the position worse. A business that spends three weeks reluctant to talk to anyone arrives at the date with fewer options than it had, and frequently pays more for the one it takes.
The genuine warning sign is not one funded tax payment. It is a pattern of them, quarter after quarter, which says the business is operating on money that was never its own and is now permanently behind. That is a structural position and it needs an accountant looking at the whole picture rather than another facility.
Prevention
Four habits that remove the problem.
None of these requires a facility, and together they mean the date stops being an event.
02
A standing transfer for provisional tax
A weekly or monthly transfer sized against the expected liability spreads a lumpy obligation across the period it was earned in, which is where it belongs.
03
Dates in the same calendar as everything else
Tax dates that live only in the accountant’s system arrive as news. In the business’s own calendar, alongside payroll and rent, they are planned for like any other outgoing.
04
A mid-period estimate
A rough calculation halfway through a period shows what is coming while there is still time to do something about it, rather than at the point the return is prepared.
Funding a tax payment
What a facility does and does not do.
What it does
- Meets a dated obligation and stops interest and penalties accruing
- Keeps the business current with Inland Revenue, which matters for later arrangements
- Converts a lump sum into instalments the business can trade through
- Preserves the relationship with the department, which is worth more than it appears
- Buys time where a genuine receipt is coming and the dates simply do not line up
What it does not
- Address why the money was not held in the first place
- Come cheaply, particularly where a short-term facility is the only option available
- Help if the same shortfall arrives next quarter for the same reason
- Replace the conversation with Inland Revenue, which is frequently cheaper
- Substitute for an accountant’s view where the pattern is repeating
The honest limit
What a recurring tax shortfall is telling you.
A one-off shortfall around a tax date is a cash-flow event and it is unremarkable. A business that is short at every GST date is operating on money it collected on someone else’s behalf, and the underlying position is worse than the tax problem it presents as.
That is worth saying plainly because the funding options above will keep working for several quarters, and each one makes the eventual reckoning larger. The point at which an accountant should be looking at the whole position is the second occurrence rather than the fifth.
Nothing on this page is tax advice, and the treatment of any particular liability depends on the business’s circumstances, its provisional tax method and its history with the department. Inland Revenue is the primary source and the accountant is the right adviser.
The calendar
Why the dates rarely suit the trading.
Filing frequencies and instalment dates are published by Inland Revenue and depend on the business’s turnover and elected method. The point below is the shape of the mismatch rather than any particular date.
| Obligation | Calculated on | Arrives |
|---|---|---|
| GST | A period already traded | On a fixed date after that period |
| Provisional tax | A prior year or an estimate | On fixed instalment dates |
| PAYE | Wages already paid | Monthly or twice monthly |
| Terminal tax | A year already finished | After the return is filed |
Indicative of the shape rather than a schedule. Inland Revenue publishes the applicable dates and frequencies.
Reading the table
Every one of them looks backwards.
Each obligation is calculated on a period that has already happened and paid out of a period that is happening now. In a steady business that is unremarkable, because the two periods look similar. In a business whose trading moves, it means a liability sized in a strong quarter is paid out of a weak one.
That is why a seasonal business feels tax dates more sharply than a steady one, and why a business coming off a strong year can find its provisional instalments uncomfortable in a softer one. Neither is a failure of planning so much as a consequence of how the system is built.
It is also why the accountant conversation belongs before the date rather than after. Where a current year is genuinely tracking below the basis the instalments were calculated on, the options for doing something about that depend on the method the business uses and on acting in time.
The cost of funding it
What spreading a tax payment costs.
A facility used to meet a dated liability is an ordinary term facility, and this is what one costs. Set it against the published Inland Revenue position before deciding. Indicative only, and not a quote or offer of credit.
Indicative repayment
Weekly
$958/week
$4,153 /month $2,375 total interest
$35,000
$5,000 $500,000
9 months
6 months 5 years
16.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $35,000 scenario
9 months at 16.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Inland Revenue, GST
The published source for GST return periods and due dates.
- Inland Revenue, provisional tax
The published source for provisional tax methods, instalment dates and re-estimation.
- Inland Revenue, payment options
The published source for instalment arrangements referred to throughout this page.
- Inland Revenue, interest and penalties
The published source for what accrues where a liability is not paid on time.
- Chartered Accountants Australia and New Zealand
Referenced for the point that a recurring shortfall is a question for a chartered accountant.
FAQ
Paying GST or provisional tax, questions answered
Why do businesses come up short at GST dates?
Because GST arrives in the trading account with every sale and is indistinguishable from revenue, so it is available to spend before the return falls due. Where trading softens between collection and payment, the current month cannot cover a liability accrued in a busier one.
Can a tax date be extended?
The dates themselves are fixed. What is available is an instalment arrangement with Inland Revenue, which spreads the payment rather than moving the date, and which is dealt with routinely when approached early.
Is it better to arrange with Inland Revenue or to borrow?
It depends on the cost of each, and the arrangement should be priced before the facility is arranged rather than after. Inland Revenue publishes its interest and penalty settings, so the comparison can be done properly.
Does an instalment arrangement affect the business?
It is an ordinary process rather than an adverse event, and it is far better than a missed date with no contact. What follows in any particular case depends on the circumstances, and the accountant is the right person to explain the consequences.
Can provisional tax be reduced mid-year?
Sometimes, where the current year is genuinely tracking below the basis the instalments were calculated on, and the options depend on the method the business uses. It is a conversation with the accountant and it has to happen before the date.
What happens if a date is missed with no contact?
Interest and penalties accrue as published, and a later arrangement is harder to reach from a worse starting position. It is the most expensive of the available routes and the one chosen most often.
Is borrowing to pay tax a sign of trouble?
One occurrence is a cash-flow event and is unremarkable. A pattern across several quarters says the business is operating on money it collected on someone else’s behalf, and that is a structural position needing an accountant rather than another facility.
What is the cheapest prevention?
A separate account holding the GST portion as revenue arrives. It costs nothing, it takes an afternoon to set up, and it commonly removes the problem permanently.
Which facility suits a tax payment?
Where a receivables or revolving facility already exists, drawing on it is ordinarily cheapest. Where nothing exists, a term facility sized to the liability is the usual shape, and a short-term facility is the expensive last option.
Does funding a tax bill affect future lending?
A single funded liability is unremarkable. Repeated short-term facilities around tax dates are visible to a later lender and read as a pattern rather than as an event, which is one more reason to address the cause.
Should the accountant be involved?
Before the date, yes. Re-estimation options, the arrangement process and the interaction with the wider position are all things an accountant can act on while there is still time, and none of them once the date has passed.
Is this page tax advice?
No. It is general information about a common situation. This site is not a chartered accountant or a registered financial adviser, Inland Revenue is the primary source, and any particular liability is a question for the business’s accountant.
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