ATO Interest Non-Deductible from 1 July 2025: How to Prepare Your Business

The Australian Taxation Office (ATO) will no longer allow tax deductions for General Interest Charges (GIC) or Shortfall Interest Charges (SIC) from 1 July 2025. This update, passed by Parliament in March 2025, could affect how small businesses handle their overdue tax debts and financial planning.

What Has Changed?

Currently, businesses can claim GIC and SIC as tax deductions, slightly reducing the burden of ATO interest charges. With the new rules, these deductions will be eliminated, increasing the effective cost of carrying a tax debt.

What Are GIC and SIC?

• General Interest Charge (GIC) is interest the ATO applies to unpaid tax debts.

• Shortfall Interest Charge (SIC) is charged when the ATO adjusts a tax assessment due to under-reporting or errors in self-assessment.

  
  

Both charges accrue interest daily, and from 1 July 2025, they will no longer reduce your taxable income.

Impacts for Business Owners

• Cash Flow Strain: Businesses will need to pay the full interest amount with no tax deduction to offset it.

• Greater Financial Risk: Carrying tax debt becomes more costly, with higher compounding rates (GIC is currently over 11%).

• More Urgency for Compliance: Timely payments and accurate reporting will be more crucial than ever.

  
  

What You Can Do Now

• Review Outstanding Debts: Settle or reduce your tax debts before 30 June 2025.

• Talk to the ATO Early: If needed, set up a payment plan.

• Explore Business Finance Options: Business loans may offer deductible interest and be a smarter alternative.

• Work With a Bookkeeper: Accurate, up-to-date books can help you stay ahead of obligations and avoid interest altogether.

  
  

How Love Bookkeeping Can Help

While we don’t offer tax advice, Love Bookkeeping can support your business by:

• Keeping your accounts clean and reconciled

• Helping you stay on top of ATO obligations

• Identifying early signs of ATO debt risks

• Supporting cash flow tracking and reporting

  
  

Staying ahead of these changes starts with accurate bookkeeping. If you'd like help getting prepared, visit www.lovebookkeeping.com.au to connect with our team.