In recent years, businesses – both large and small – have relied on the ATO as a de facto lender, allowing tax debts to accumulate as a low-cost form of financing. However, the ATO has been actively cracking down on this practice, increasing enforcement on payment plans while also raising interest rates on overdue tax debt by approximately 4% since 2021.
Now, an even bigger change is coming. From July 1, 2025, businesses will no longer be able to claim General Interest Charges (GIC) and Shortfall Interest Charges (SIC) as tax deductions. This reform will significantly increase the true cost of tax debt, making it more expensive and riskier for businesses to carry arrears. Now is the time to take action and explore alternative finance solutions before these changes take effect.
The Real Cost of Losing Tax Deductions
Previously, businesses could offset GIC (11.17%) and SIC (7.17%) against taxable income, reducing the effective cost.
For example, under a 30% corporate tax rate:
Before: After-tax cost of GIC = 7.82%, SIC = 5.02%
After July 1, 2025: Full rate applies – GIC at 11.17%, SIC at 7.17%
This increases the real cost by around 40% making tax debt more expensive and harder to manage.
How to Manage ATO Debt Before Costs Escalate?
Instead of letting tax arrears accumulate at high rates, businesses should explore better financing options, such as:
- Capital raising against unencumbered equipment – Unlock working capital from business assets.
- Unsecured business loan – Fast funding without collateral.
- Drawing down equity/refinancing home loan – Lower interest rates for long-term savings.
These options could be tax-deductible and can provide a cheaper, structured approach to managing tax liabilities.
We always advise clients to speak with their accountant before making any tax based decisions, as they are best placed to advise you.
Act Now to Avoid Higher Costs
Delaying action will only result in higher interest charges and fewer available solutions. If your business or clients have outstanding tax debt, now is the time to restructure before these changes take effect.
Get in touch today to explore the best financing option for your business.
