Changes to ATO Interest: What SMEs Need to Know

Starting 1 July 2025, interest charged by the ATO will no longer be tax deductible. This includes:

• General Interest Charge (GIC)
• Shortfall Interest Charge (SIC) 

If your business uses ATO payment plans or treats tax debt as a short-term cash flow strategy, this is the time to rethink your approach.

What’s Changing?

Until now, SMEs could claim a tax deduction on ATO interest – softening the financial impact of late payments or payment plans. But from 1 July 2025, that deduction is gone.

This means you’ll be paying ATO interest in after-tax dollars, making it a more expensive form of borrowing than before.

What You Can Still Claim

• Interest charged before 1 July 2025 remains deductible
• You can still include these in your 2024–25 tax return

Why It Matters for SMEs

ATO interest rates are typically higher than bank rates. With deductibility removed, relying on ATO payment plans becomes even less cost-effective.

Now’s a good time to:

• • Review your cash flow strategy
    
  • Prioritise on-time tax payments
  • Speak with your accountant or advisor about more affordable finance options 

The Bottom line?

ATO debt just got more expensive. Planning ahead will save your business from unnecessary interest costs.