What You Need to Know

From 1 July 2025, the ATO will scrap tax deductibility for interest charges on overdue tax debts — including the General Interest Charge (GIC) and Shortfall Interest Charge (SIC). This marks a significant shift for businesses that rely on ATO payment arrangements to manage cash flow.

What’s Changing?

Up until now, businesses could claim a tax deduction for GIC and SIC. This provided some financial relief when managing late payments. But from 1 July 2025, that benefit disappears.

  • Currently: GIC and SIC are tax deductible.
  • From 1 July 2025: These charges will no longer be deductible, even if the debt relates to prior income years.
  • For businesses using substituted accounting periods (SAPs): This applies from the first income year starting after 1 July 2025.

Why This Matters

The GIC rate is currently over 11% p.a., compounding daily. Losing the tax deductibility makes this a true out-of-pocket cost, increasing the effective interest rate businesses pay.

If your business has relied on ATO payment plans as a low-friction cash flow tool, you’ll need to reconsider. This change means:

  • The cost of delays increases significantly.
  • ATO interest now becomes more expensive than before.
  • There’s no offset at tax time.

What You Should Do Now

To get ahead of the change, consider the following steps:

✅ Pay Off Outstanding ATO Debts

Where possible, pay down tax liabilities before 30 June 2025. Any GIC or SIC incurred before that date will still be deductible.

✅ Lodge Everything On Time

Outstanding lodgements often trigger GIC. Finalise returns early to prevent interest from accruing in the new financial year.

✅ Bring Forward Tax Assessments

If you expect shortfalls or late payments, it may be wise to finalise assessments before the cutoff to ensure any resulting interest remains deductible.

✅ Consider Refinancing

Using commercial finance to repay ATO debts may be worthwhile, as interest on business loans remains deductible.


Need Help Reviewing Your Tax Strategy?

At Quantum Advisory, we can help you:

  • Assess your ATO debt exposure
  • Identify and implement refinancing options
  • Optimise your cash flow and tax position ahead of 1 July 2025

Book a consult today and take control of your tax costs before the rules change.