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Yep… even the tax man is raising his prices

If you currently owe money to the ATO, I have some news — and it is not the fun kind. From 1 July 2025, the ATO is making a change that means tax debt is about to cost you more. The two most common interest charges applied to late or underpaid tax will no longer be tax deductible.

In simple terms? Holding onto ATO debt is about to become noticeably more expensive for both individuals and businesses.

Let’s break it down so you know exactly what’s changing and what you can do about it.

What types of ATO interest are losing their tax-deductible status?

General Interest Charge (GIC)

This is the interest the ATO whacks on daily when you pay tax late. It compounds — which means it grows faster the longer you leave it sitting there.

Shortfall Interest Charge (SIC)

This one applies when you have underpaid tax because of an error or an amended return. Like GIC, it’s calculated daily and compounds beautifully… for the ATO.

What’s actually changing?

Up until now, GIC and SIC have been tax deductible. So while the interest still stung, you would at least get a little relief come tax time.

But from 1 July 2025, that safety net disappears. You won’t be able to claim these interest charges as a deduction anymore — even if the debt itself originated years ago.

Translation:
More real cost.
More out-of-pocket pain.
More impact on your cash flow.

How to prepare (and save yourself money)

A few smart moves now can save you a whole lot later:

1. Don’t let ATO balances sit around gathering dust (or interest).

The longer your debt hangs around, the more interest you are handing over. Prioritise paying it down sooner rather than “sometime later when life settles down” — because we all know that life never settles down.

2. Approach payment plans with eyes wide open.

Yes, the ATO offers payment plans.
Yes, interest still racks up while you are on them.
They are useful, but not magic — make sure you calculate the true cost before agreeing to that next payment plan.

3. Plan ahead for future tax obligations.

Treat tax like a non-negotiable business expense (because it is).
Set aside money for your BAS, PAYG, super, and annual income tax.
Future you will be far less stressed, and ATO debt won’t sneak up on you again.

Need help navigating ATO debt or tightening up your tax planning?

Whether you have already got an ATO balance outstanding or you want to get ahead before these changes hit, we are here to help.

We will work with you to create a proactive cash flow plan that reduces unnecessary interest and keeps your business financially healthy — without the stress spiral.

Just reach out when you are ready and we can book a financial coaching session in our diary.