ATO Interest Charges No Longer Deductible: What It Means for You

From 1 July 2025, a key change to tax legislation is now in effect: interest charges imposed by the ATO are no longer tax deductible.

What’s Changed?

Previously, interest charges from the ATO, such as the General Interest Charge (GIC) and Shortfall Interest Charge (SIC), were tax deductible, reducing your taxable income.

Now that the law has changed:

• GIC and SIC are no longer deductible, regardless of when the original tax debt arose.
• If the ATO remits interest incurred from 1 July 2025 onward, it won’t be assessable income.
• However, interest that was charged before 1 July 2025, if later remitted, will still be assessable.

What Does This Mean for You?

Owing tax debt is now more expensive. The current GIC rate is 11.17%, compounded daily, with no tax deduction; the real cost adds up quickly.

What Can You Do?

To minimise the impact of these changes, we recommend:

• Review any outstanding tax debts and repay them if possible.
• Implement strategies for timely tax payments to avoid interest charges.
• Consider finance options; interest on third-party loans may still be deductible.
• Speak with our team to review your tax position and adjust your planning.

Need Help?

We’re here to support you. If you’d like to discuss how these changes affect your business, please contact the Sharp Accounting team.