ATO Interest Charges Non-deductible
- Future Accounting
- Jun 26
- 2 min read
From 1 July 2025 - Interest Charged by ATO is no longer claimable as a tax deduction!
From 1 July 2025, the ATO will no longer permit tax deductions for interest charges applied to unpaid tax debts.
Making ATO Interest Charges non-deductible affects both individuals and businesses, making it crucial to understand the implications and prepare accordingly.
What’s Changing? - ATO Interest Charges Non-deductible!
Starting 1 July 2025, taxpayers can no longer claim income tax deductions for:
General Interest Charge (GIC): Applied to unpaid tax liabilities.
Shortfall Interest Charge (SIC): Applied when a tax shortfall arises due to an amended assessment.
This change applies to interest charges incurred on or after 1 July 2025, regardless of when the underlying tax liability arose.
Current ATO Interest Rates
As of the April–June 2025 quarter, the ATO's interest rates are:
GIC: 11.17% per annum
SIC: 7.17% per annum
What Remains Deductible?
GIC and SIC incurred before 1 July 2025 remain deductible under the previous rules.
Interest on external loans used to pay tax debts (e.g., business overdrafts or structured loans) remains deductible, provided the loan is clearly linked to business activities.
Implications for Taxpayers
Increased After-Tax Cost: The removal of deductibility increases the real cost of late or underpaid taxes.
Impact on Payment Plans: Businesses with ATO payment plans extending beyond 1 July 2025 will find any GIC or SIC accrued after this date non-deductible.
Refinancing Options: Businesses may consider refinancing ATO debts through commercial loans to maintain interest deductibility.
Will the ATO Refund Interest Charged?
The ATO can have sympathy for circumstances that have resulted in financial hardship. For example, natural disaster such as drought, or when changing your accountant. If you have an ATO Debt, and financial hardship, we are happy to assist you in applying for a refund.
What Now?
With the ATO saying no to claiming ATO Interest from 1 July 2025, now is the time to review your tax position, assess payment plans, and consider refinancing strategies.
Our team can help you understand the impact on your business and explore practical steps to minimise the cost. Book an appointment today to ensure you're prepared and protected before the new rules take effect.
