Reach out to our friendly team at Atlas Broker who will be able to guide you in the right direction.
Why Businesses Use ATO Debt as a Finance Strategy
For many Australian businesses, deferring tax payments has become an unofficial form of low-interest borrowing. With relatively lenient enforcement and deductibility of interest charges, it was often seen as a safer, more flexible way to manage cash flow.
Why this has been appealing:
- Lower effective interest due to deductibility
- Easy to set up and delay
- Minimal short-term impact on operations
What’s Changing from July 1, 2025?
From this date, the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) will no longer be tax deductible.
Here’s what this means for you:
- GIC (11.17%) and SIC (7.17%) will now apply at full cost
- No offsetting against taxable income
- Increased total cost by up to 40%
Example Scenario:
A business with $100k in overdue taxes could see interest expenses risefrom ~$7.8k to ~$11.2k annually, due to lost deductibility.
Comparison Table:
| Interest Type | Rate | Effective Cost (Before) | Effective Cost (After) |
|---|---|---|---|
| GIC | 11.17% | 7.82% | 11.17% |
| SIC | 7.17% | 5.02% | 7.17% |
Understanding the Real Cost of Tax Debt
In simple terms, tax debt is about to get significantly more expensive—and riskier.
Key downsides:
- Higher long-term interest burden
- Potential impact on business creditworthiness
- Reduced access to payment plans from the ATO
Related: ATO Payment Plans Getting Tougher – What You Need to Know
Smarter Ways to Manage Your ATO Debt
Before the new rules kick in, it’s worth exploring more structured, strategic options to finance your liabilities.
Alternative Funding Options:
- Capital Raising Against Unencumbered Equipment: Free up working capital by leveraging your equipment assets.
- Unsecured Business Loans: Fast access to funds without needing collateral.
- Refinancing or Drawing Down Equity: Use existing property equity for lower interest repayments.
These options are often tax-deductible, unlike ATO interest charges.
Don’t Wait – Take Action Now
Every month of delay increases your exposure to compounding interest and limits your finance options.
Next steps:
- Talk to a finance specialist
- Assess your asset position
- Restructure your tax obligations ahead of the July 2025 deadline
Speak with a Finance Specialist
Contact us Today to book a confidential strategy session.
We strongly recommend discussing your plans with your accountant before making any changes. But when it comes to finance, Atlas Broker is here to help structure a smarter, more cost-effective solution.
Reach out to our friendly team at Atlas Broker who will be able to guide you in the right direction.
