Changes to Tax Deductibility of ATO Interest Charges – Effective 1 July 2025

Just when we thinking that there is some light at the end of the tunnel – the ATO is about to wrench away yet another deduction! Commencing 1 July 2025, businesses and individuals will no longer be able to claim a tax deduction for interest charged by the ATO on unpaid tax debts. This includes both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC).

Previously, these interest charges could be deducted on tax returns, helping to reduce the overall cost of carrying a tax debt. From 1 July 2025 onwards, any new interest incurred will not be deductible, even if the debt relates to earlier years. This change will make it more expensive to keep unpaid tax debts.

What you can do:

• Pay off debts early: Paying your ATO debt now will reduce the interest you pay. If you can’t pay in full, consider setting up a short-term payment plan.

• Seek advice: Talk to a tax professional for guidance tailored to your situation.

• Plan ahead: Set aside money for GST, PAYG withholding, and superannuation to avoid future debt.

Interest incurred before 1 July 2025 can still be claimed as a deduction in your 2024–25 tax return.

If you're facing financial hardship, the ATO offers support options.

Please contact Steve Marsten on (07) 3876 6211 or email manager@applebyaccountants.com

for more information.