If you're a small or medium-sized business owner in Australia, there's an important tax change you need to be aware of. From 1 July 2025, interest charges applied by the ATO — including the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) — will no longer be tax deductible.
This is a major shift in how ATO debt is treated for tax purposes, and it could impact your bottom line if you carry unpaid tax debts or are facing a tax shortfall.
What’s Changing?
Until now, ATO interest charges have been tax deductible, meaning they helped reduce your taxable income in your annual return. This was especially helpful during periods of cash flow stress, when businesses were more likely to carry outstanding tax debts.
From 1 July 2025:
What This Means for You
If you incur GIC or SIC after 1 July 2025, those charges will become an additional cost to your business, with no tax relief available. This change increases the importance of keeping up with your ATO obligations and avoiding interest wherever possible.
However:
Why It Matters
ATO interest charges can add up quickly:
What You Should Do Now
To stay ahead of the changes and avoid unnecessary tax costs:
Need Help?
If you’re unsure how this change affects your business or want support reviewing your ATO obligations, feel free to get in touch. Staying proactive now could save you money later.
This is a major shift in how ATO debt is treated for tax purposes, and it could impact your bottom line if you carry unpaid tax debts or are facing a tax shortfall.
What’s Changing?
Until now, ATO interest charges have been tax deductible, meaning they helped reduce your taxable income in your annual return. This was especially helpful during periods of cash flow stress, when businesses were more likely to carry outstanding tax debts.
From 1 July 2025:
- Interest charges imposed by the ATO will no longer be deductible in your income tax return.
- This applies to all income years starting on or after 1 July 2025, including those with substituted accounting periods (SAPs).
What This Means for You
If you incur GIC or SIC after 1 July 2025, those charges will become an additional cost to your business, with no tax relief available. This change increases the importance of keeping up with your ATO obligations and avoiding interest wherever possible.
However:
- Any interest charges incurred before 1 July 2025 will still be deductible in the 2024–25 (and earlier) tax years.
- If the ATO later remits interest you've already claimed, that amount must be included as income in the year it’s remitted.
Why It Matters
ATO interest charges can add up quickly:
- GIC applies to unpaid tax debts, and it’s charged daily until the debt is cleared.
- SIC is charged when the ATO amends your assessment after finding a tax shortfall.
What You Should Do Now
To stay ahead of the changes and avoid unnecessary tax costs:
- Review any ATO interest charges and, if possible, pay off outstanding debts before 1 July 2025.
- For the 2024–25 tax return, continue tracking and claiming deductible GIC and SIC as normal.
- If your business uses a substituted accounting period, check when your financial year begins — the new rules apply to any SAP starting after 1 July 2025.
- Speak to your accountant or BAS agent now to plan ahead and avoid surprises at tax time.
Need Help?
If you’re unsure how this change affects your business or want support reviewing your ATO obligations, feel free to get in touch. Staying proactive now could save you money later.
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