ATO Interest Charges Will No Longer Be Deductible from 1 July 2025

If you have an ATO debt, it could cost you more from 1 July 2025.

From this date, interest charges applied by the ATO — including the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) — will no longer be tax-deductible. This means you’ll pay the full cost of any interest, with no offset at tax time.

If you currently have a tax debt with the ATO — or want to avoid one — it’s important to be aware of a significant change coming into effect from 1 July 2025.

From this date, two key types of ATO interest charges will no longer be tax-deductible:

  • General Interest Charge (GIC): Applied when tax payments are made late — currently compounding daily at 10.78% per annum.
  • Shortfall Interest Charge (SIC): Applied when the ATO adjusts a return and tax was underpaid — currently compounding at 6.78% per annum.

What does this mean for you?

Previously, taxpayers could claim these interest charges as a deduction, reducing the after-tax cost. But from 1 July 2025, the full amount of GIC and SIC will be out-of-pocket, with no deduction allowed — even if the debt relates to earlier years.

For example:

If you’re on a 45% marginal tax rate and incur $1,000 in GIC, you currently pay only $550 after tax.
From 1 July 2025, that same $1,000 interest will cost you the full amount — no tax break.

What can you do to stay ahead?

  • Pay off ATO debts as quickly as possible to reduce compounding interest
  • If needed, consider financing options with a lower interest rate — some business-related interest may still be deductible
  • Proactively set aside funds for future tax obligations (GST, PAYG, Income Tax)
  • Reach out for a review of your tax position and debt strategy

With ATO interest rates rising and deductibility removed, being proactive can save you real money.

Need help? Whether you’re managing an existing ATO debt or want to avoid one in the future, our team is here to guide you. Let’s work together to protect your cash flow and stay compliant.

📞 Contact us today to create a tax strategy that works for you.

Disclaimer: This website is designed for informational and educational purposes. Although we exert diligent efforts to maintain the accuracy and reliability of the content, we must disclaim liability for any errors, omissions, or inaccuracies. The content provided is “as is” and is not accompanied by warranties, whether expressed or implied. It should not serve as the sole basis for financial or legal decisions.

Given the evolving nature of financial regulations and conditions, the accuracy and reliability of information may change over time. Users are urged to exercise due diligence and consult with a qualified financial professional for personalised advice. Viden Advisory Pty Ltd bears no responsibility for direct or indirect consequences, encompassing financial loss or legal matters stemming from the use or misuse of the information on this website.

Please be aware that the information, by no means, is a substitute for financial advice.

Contact us

We’re here to help answer your questions. Business matters can be complicated, our experts are on hand to help inform you of every aspect regarding your topic. We take great pride in using our expertise for you and look forward to hearing from you.

Name(Required)
0 of 600 max characters

Business Hours

Open – Mon-Fri 8.30-5.00
Closed – Sat-Sun and Public Holidays

Contact Us

  • 1800 773 643

  • enquiries@viden.com.au

  • www.viden.com.au

Viden Insights

Contact us now to see how we can help you?

Contact us to arrange an initial consultation in which we review existing structures and processes, and provide recommendations to enhance and optimise tax outcomes, asset protection and succession planning.