Deductions denied for ATO interest charges

Posted 18 Apr

Deductions denied for ATO interest charges

The ATO can apply a general interest charge (GIC) if an amount of tax or some other liability remains unpaid after the due date. This includes where:

• there is a tax shortfall because an amendment or correction is made
• an instalment of tax has been underestimated
• a return is lodged after its due date

The current GIC rate for the quarter ended June 2025 is 11.17%.

On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it would amend the tax law to deny deductions for ATO interest charges from 1 July 2025. This bill was passed by the Australian Government on 26 March 2025 and is now law.

This means that taxpayers can no longer claim tax deductions for GIC incurred from 1 July 2025 and will therefore result in a higher tax liability for those who incur these charges and cannot claim the deduction.

The ATO applies GIC to encourage timely payments of tax and ensure that taxpayers who pay late don’t have an unfair advantage over those that pay on time.  The new law will encourage entities to meet their tax lodgement and payment deadlines and provide fairness to those that lodge and pay their tax debts by the due dates.

The ATO have outstanding tax obligations over 50 billion dollars. It is expected that the new legislation will assist the ATO in its action to reduce this.

If you are currently managing debts with the ATO, consider the following actions prior to 1 July 2025:

• Review ATO payment plans. If your current payment plan continues after 1 July 2025, consider repaying or renegotiating the ATO debt to minimise GIC costs.
• Ensure all tax and GST lodgements are up to date.
• Avoid paying the ATO after the due date.
• Request GIC remissions when available. This can include times of natural disasters and cases of financial hardship.

If you would like to discuss how these changes will impact you or your business, please get in touch with your WDF Team member today. 

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