New deduction rules for ATO interest charges

If you’ve ever paid a late tax bill, chances are you’ve also been hit with the ATO’s General Interest Charge (GIC) – and up until now, you could usually claim that interest as a tax deduction. But from 1 July 2025, that’s changing.

What’s happening?

From that date forward, you’ll no longer be able to claim a deduction for ATO interest charges – including GIC and other interest types – even if they relate to unpaid tax from a previous financial year.

What’s still allowed?

• If the charge was incurred before 1 July 2025, you can still claim it as a deduction in the 2024–25 financial year.

• But if the ATO later refunds or reduces a charge you already claimed, you’ll need to declare that amount as income in the year it’s refunded.

Quick example:

• In June 2025, your business gets an $800 GIC for a late payment – that’s still claimable.

• But if you get another $800 charge in August 2025, that one’s not deductible under the new rules.

What can you do?

Now’s a good time to:

• Review any unpaid tax liabilities

• Consider paying them before 1 July 2025 to lock in any remaining deductible interest

• Chat to your tax advisor to make sure you’re across the change and not caught off guard come EOFY

Need help preparing for these changes? Reach out to your bookkeeper sooner rather than later—they’ll be your best support through this change.

If you need advice or assistance, get in touch today, and follow us for more tips.

Disclaimer

This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided in relation to your own circumstances.