Big Changes Ahead for Business Owners with ATO Tax Debt
From 1 July 2025, businesses will no longer be able to claim a tax deduction on interest charged by the ATO. Whether you’re managing existing repayments or have just received a new ATO tax bill, this change will impact your bottom line. If your business is carrying ATO tax debt, it’s essential to understand how this affects your financial strategy moving forward.
What’s Changing: ATO Tax Interest No Longer Deductible
Right now, many business owners with ATO tax debt can claim deductions on interest charges such as the General Interest Charge (GIC) and Shortfall Interest Charge (SIC). From 1 July 2025, that will no longer be allowed. The interest you pay on your ATO tax debt will be treated as a non-deductible cost—similar to a penalty or fine.
This means:
- You can’t claim ATO tax interest as a deductible business expense
- You’ll pay tax on the income used to cover ATO interest
- Your after-tax cost of carrying an ATO tax debt will increase
- These changes apply regardless of whether your tax debt relates to business activity
You can read more about the legislation update on the ATO website.
Why This Affects Your Business Cash Flow
Let’s say your business owes $50,000 in ATO tax and is repaying it over 12 months. With the current interest rate of 11.17%, you would pay around $5,585 in interest. Previously, this interest could be claimed as a deduction, reducing your taxable income. After 1 July, that deduction disappears, and the effective cost of your ATO tax debt rises. For many businesses, this could mean paying the equivalent of 15% or more on their tax debt when factoring in the lost tax benefit.
Smarter Ways to Manage ATO Tax Debt
Relying on ATO payment plans may no longer be the smartest move. With rising interest rates and no tax deductibility, many businesses are exploring alternative finance solutions.
At Finance Finance Finance, we help businesses manage their ATO tax debt with funding options that keep interest tax-deductible and cash flow intact.
These include:
Business Loans
Tax-deductible funding options tailored for business owners, with competitive interest rates and flexible repayment terms.
Invoice Finance
Access the money tied up in your unpaid invoices to stay on top of tax obligations.
Asset-Based Lending
Use business assets to secure more affordable, longer-term funding.
Refinance Options
We can help you explore home loan refinance solutions that support ATO tax debt repayment. These options are designed to assist business owners looking to consolidate debt and improve cash flow.
You can learn more about these options by visiting our page on business finance solutions for tax debt.
The Risks of Ignoring ATO Tax Debt
ATO tax debt doesn’t just go away. If left unpaid, the ATO may take action such as garnishing your accounts, issuing Director Penalty Notices, or even initiating legal proceedings to wind up your business. Acting early gives you more flexibility, better funding terms, and a stronger financial position to negotiate from.
What to Do Next
With this major change coming into effect on 1 July 2025, now is the time to review how your business is handling ATO tax obligations. Taking a proactive approach could save you thousands in unnecessary costs and help you access finance that’s both tax-deductible and more affordable than ATO interest rates. At Finance Finance Finance, we specialise in helping business owners across Australia restructure and reduce the cost of their ATO tax debt. Speak to our team today to explore funding options that keep you in control.
Frequently Asked Questions
- Is ATO tax debt interest still tax-deductible?
Not after 1 July 2025. ATO interest will no longer be considered a deductible business expense. - What’s the current ATO interest rate?
As of Q2 2025, the General Interest Charge rate is 11.17%, and it may continue to rise. - Can I refinance my ATO tax debt?
Yes. We can help you find finance solutions that repay your tax debt and keep the interest tax-deductible.
