Upcoming Tax Deduction Changes for ATO Interest Charges – What Business Owners Need to Know
If your business has ever paid interest to the ATO for late tax payments or underpayments, there’s an important change on the horizon that could affect your bottom line.
❗️What’s Changing?
From 1 July 2025, the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) will no longer be tax-deductible. These charges are applied by the ATO when tax payments are made late or when there’s a shortfall in what’s owed.
Up until now, these interest charges could be claimed as a tax deduction – effectively softening the blow when businesses found themselves on the wrong side of a tax deadline.
But that’s about to change.
📅 What Does This Mean for Your Business?
From the 2025–26 financial year onward:
- No more tax offset – You’ll wear the full cost of GIC and SIC without the benefit of a tax deduction.
- Late tax payments will cost more – Even small delays or underpayments will have a bigger impact on cash flow.
- Tighter tax management will be key – Getting your tax right the first time and paying on time will be more important than ever.
✅ What You Can Do Now
Here are a few ways to stay ahead of this change:
- Review your tax planning – Make sure you’re budgeting for accurate and timely tax payments in your business cash flow.
- Keep a close eye on lodgement dates – Avoid unnecessary charges by meeting all your BAS, PAYG, super, and tax deadlines.
- Work with your accountant or advisor – Talk to us if you’re unsure how this might affect you or if you’ve relied on GIC deductions in the past.
- Consider payment plans carefully – While the ATO does offer payment plans, the interest will be more expensive after 1 July 2025 without that tax deduction buffer.
👋 Final Thoughts
This change is part of a broader move by the ATO to encourage better compliance and discourage the use of payment plans as a long-term cash flow strategy. While it may not seem like a big deal now, it could mean thousands of dollars in additional (non-deductible) costs for some businesses over time.
If you’d like help reviewing your tax obligations, improving your cash flow planning, or setting up systems to stay on top of your tax, feel free to get in touch. We’re here to help you stay compliant and financially strong.
