As of 1 July 2025, interest charges on unpaid tax debts – including the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) – are no longer tax deductible.
Previously, businesses and individuals could claim a deduction for these interest expenses, softening the financial blow of running behind on ATO payments.
That is no longer the case. This change increases the real cost of non-compliance and makes timely payment of tax debts more important than ever.
What It means for your clients:
- Late = more expensive: There’s now no tax offset to reduce the sting of ATO interest.
- Cashflow and tax planning need adjusting: Clients with regular ATO payment plans or who delay payments may face a heavier cost burden.
- Business owners may be caught out: Many still assume deductibility applies, a proactive reminder could help protect them from surprise tax bills next year.
Actions for accountants now:
- Review clients’ tax debt positions: Consider whether existing or planned payment arrangements still make sense under the new rules.
- Update projections and cashflow models: Remove interest deductibility assumptions in forecasts.
- Educate clients: Many will need help understanding the real cost impact, especially those with tight margins or regular ATO interest charges.
- Reinforce good compliance behaviour: Timely lodgement and payment has never been more valuable.
Want to Support Clients Through the Change?
TAG works with accountants to help clients avoid unnecessary tax costs and stay in control of their ATO obligations. If you’d like to explore strategies to support your clients under the new rules, we’re here to assist. Contact us at team@tagfinancial.com.au
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2025. Please do not reproduce without the expressed written consent of the author.