Big changes are coming to the way ATO interest charges are treated and it could make unpaid tax debt significantly more expensive for Australian taxpayers.

From 1 July 2025, taxpayers will no longer be able to claim income tax deductions for ATO interest charges.

This means the cost of using the ATO as a form of finance will effectively increase by at least 30%.

What’s Changing?

The new rules apply to both:

• General Interest Charge (GIC)
• Shortfall Interest Charge (SIC)

Any GIC or SIC incurred before 1 July 2025 will still be tax deductible.

However, from 1 July 2025 onwards:

• Interest charges will no longer be deductible
• Any remitted interest charges will no longer need to be included as assessable income

Current ATO Interest Rates

For the April to June 2025 quarter, current ATO interest rates are:

• General Interest Charge (GIC): 11.17% per annum
• Shortfall Interest Charge (SIC): 7.17% per annum

Recommended Actions

To minimise the impact of these changes, we recommend:

• Settling existing ATO debts before 1 July 2025 where possible

• Reviewing any payment plans that extend beyond 1 July

• Exploring alternative financing options where interest may remain tax deductible or carry a lower interest rate

• Implementing stronger tax planning strategies to help ensure future tax obligations are paid on time

Need Advice?

These changes could have a significant impact depending on your circumstances.

Please contact our office if you would like to discuss how the new rules may affect you and to develop a tailored strategy for managing your tax obligations going forward.