ATO Interest - Deduction Denied from 1 July 2025

 

From 1 July 2025 Taxpayers will no longer be able to claim an income tax deduction for Australia Taxation Office (ATO) Interest Charges, this includes both General Interest Charges (GIC) and Shortfall Interest Charges (SIC).

We wanted to make you aware because previously both GIC and SIC was a deductible expenses if it was related to producing assessable income and although this might still be true there is a special provision to disallow it.

This change in deductibility of the ATO Interest charges may create an issue that you may need to consider for you or your business. As the interest is no longer deductible, if you currently have any unpaid liabilities with the ATO you may consider if refinancing this debt is an option for you. The GIC rate is currently 11.17% and is calculated on a daily compounding basis on the amount overdue, where as a loan from a financial institution could have a lower interest rate, and the interest expense from a financial institution may still be deductible where the funds borrowed are used for the purpose of earning assessable income.

If you feel like this could be an option for you, please speak to your bank, lender, or finance broker directly to compare interest rates and terms of the loan.

If you do not have a finance broker, please contact our office and we can offer you to an associated broker.