From 1 July 2025, the interest charged by the Australian Taxation Office (ATO) on overdue tax debts will no longer be tax deductible.
Until now, some business owners have treated the general interest charge (GIC) – currently 11.17% and compounding daily – as a manageable expense. But from the 2025–26 financial year, that interest will increase your costs without reducing your tax bill.
To avoid getting stung, it’s wise to:
- Pay your ATO debt as soon as possible. If you can’t pay it in full, consider setting up a short-term payment plan.
- Speak to your accountant about lower-interest options. A business loan or line of credit might be a more tax-effective way to manage cash flow.
- Plan ahead by setting aside funds for GST, PAYG withholding and superannuation each month.
Staying on top of your tax obligations will allow you to avoid interest altogether. But if that’s not possible, taking action now could save you money next financial year.