ATO Interest No Longer Tax Deductible in 2025 – What That Means for You

20 June

A Major Change for Business Owners with ATO Debt

From 1 July 2025, interest charged on unpaid ATO tax debt will no longer be tax deductible. This change, announced in the 2023–24 Federal Budget, will significantly impact businesses that are already struggling with overdue tax liabilities.

What’s Changing?

Historically, businesses could claim the General Interest Charge (GIC) — the interest imposed by the ATO on overdue taxes — as a deduction on their tax returns. But from July 2025 onwards, this deduction will be removed.

Given the current GIC interest rate is over 11%, this means:

You're paying high interest on ATO debt
And now you can’t even claim it back

In short: ATO debt just got even more expensive.

Why This Matters

If your business owes money to the ATO (including income tax, PAYG, or superannuation), you may already be facing:

Cash flow stress
Ongoing interest penalties
Potential legal recovery action

Without the tax deduction, the real cost of your ATO debt increases significantly. Every dollar in interest becomes a direct expense, eroding profitability even further.

A Smarter Alternative – Small Business Restructure (SBR)

If your business is eligible, the ATO-backed Small Business Restructure (SBR) program may allow you to:

Legally reduce your tax debt (often by 50–70%)
Avoid liquidation or formal administration
Keep control of your business while restructuring
Protect your assets and reputation

It’s a practical and proven way to get back on track before interest spirals further.

Don’t Wait Until July 2025

If you're on a payment plan or struggling with ATO arrears, now is the time to explore your options. Acting early can:

Maximise your negotiation power
Reduce your risk of receiving a Director Penalty Notice (DPN)
Help you refinance or restructure your debt before the rules change

Get Help Now

At Debtfixer, we specialise in helping small businesses legally resolve tax debt through the SBR process.

References:

Australian Government Budget Paper 2023–24: budget.gov.au
ATO General Interest Charge Rates: ato.gov.au/Rates/
ASIC on Small Business Restructuring: asic.gov.au

Monica Nava