ATO Interest Charges Non-Deductible from 1 July 2025
We are writing to inform you about a significant change announced by the Australian Taxation Office (ATO) that will impact your tax planning and financial management.
Starting from 1 July 2025, taxpayers will no longer be able to claim deductions for interest charges imposed by the ATO. This includes the General Interest Charge (GIC) which is currently 11.42% (March 2025 quarter) and often applicable to ATO payment plans.
What this means for you:
- Increased Cost of Tax Debt: The cost of carrying tax debt will increase as the interest charges will no longer be deductible. This change is expected to motivate taxpayers to prioritise timely tax payments.
- Impact on Cash Flow: Businesses, especially small businesses, may need to reassess their cash flow management strategies to accommodate this change.
- Proactive Planning: It is crucial to take proactive steps to address any outstanding tax debts before the new rule takes effect. This may involve exploring alternative financing options or negotiating repayment plans with the ATO.
We recommend you assess your current tax liabilities and consider paying off any outstanding amounts before 1 July 2025 to avoid non-deductible interest charges.
