Important tax update: Changes to ATO interest deductions
From 1 July 2025, the Australian Taxation Office (ATO) will no longer allow deductions for General Interest Charges (GIC) and Shortfall Interest Charges (SIC) incurred on overdue or underpaid tax liabilities.
What this means for you
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Any ATO interest incurred on or after 1 July 2025 is non-deductible, regardless of whether the debt relates to an earlier year
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Interest accrued before this date remains deductible for the 2024–25 and earlier income years
Why this matters:
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It effectively increases the after-tax cost of carrying ATO debt. For example, with a ~11 % GIC, removing deductibility pushes the real cost even higher
Recommended actions:
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Pay down any existing ATO debt to lock in deductibility from pre 1 July interest charges.
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If debt remains, consider a refinance via a bank loan or overdraft—interest on these may still be deductible, provided the use is for income-producing purposes
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Review and rearrange cashflow, BAS, PAYG and tax settlement processes to ensure timely payment post-July.
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Discuss remission options: the ATO retains discretion to remit interest, though remission is now less common
We’re here to help:
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Want us to analyse your current ATO liabilities and identify what can still be deducted?
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Need help refinancing or arranging a third-party loan to preserve interest deductibility?
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Prefer assistance with cashflow forecasting, internal tax processes, or ATO payment plans?
Please contact our office and speak to one of our trusted advisors if you would like to discuss this further.
