What Is a Debt on Hold?
A debt on hold is a tax obligation that the ATO has temporarily paused because collecting it right now is not cost-effective.
Even when a debt is on hold, it is still legally owed. While collection is paused, the ATO will not contact you. Any future refunds or credits you are entitled to will be applied to reduce the debt, a process known as offsetting.
General Interest Charge (GIC)
No interest is added while the debt is on hold and not included in your account balance. Once it is included, interest will continue to be waived for six months. After this period, interest will start applying, and from 1 July 2025, it will no longer be tax deductible.
When a debt is put “on hold” by the ATO, it means:
- The debt is still legally payable.
- The ATO will not chase you for payment while it is on hold.
- Any refunds or credits you get in the future will be taken and applied to the debt.
- The debt may not appear in your account balance immediately, but from August 2025, most of these debts will start showing again.
- Interest does not build up while the debt is off your account. Once it is added back in, there is a 6-month period with no interest, then interest will apply. From 1 July 2025, that interest is no longer tax deductible.
In short, the debt is paused, not erased. It sits in the background until either you get a refund that offsets it or the ATO decides to bring it back into your balance.
Why does the ATO put debts on hold?
The ATO puts a debt on hold when it is not worth the cost or effort to collect at the time. This can happen if the amount is small or if you do not have the ability to pay.
The debt does not disappear. It is set aside until your situation changes or until you receive a refund that can be used to reduce it.
It is like the ATO pressing pause. They will not chase you, interest will not build up for a while, but the debt is still there in the background and can return later.
CRA and Lenders
Debts on hold will be visible in the tax portal, which may affect your rating with the Credit Report Agency (“CRA”). As the amount is still legally payable, banks or other lenders may include it when calculating total outstanding amounts to the ATO.
