Managing ATO tax debt has always been a key part of running a business in Australia. But from 1 July 2025, a new ATO tax changes 2025 rule will make overdue tax even more expensive — and far more damaging to your cash flow.

Under this change, ATO interest charges applied to overdue tax will no longer be tax-deductible. That includes both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC). While the change might seem small, the impact on your business finances could be significant.

What This Means for Your Business

Previously, if your business incurred interest from late payments or tax shortfalls, those interest amounts could often be claimed as deductions. This tax deduction helped to reduce the overall financial hit.

From July 2025, that benefit disappears. Any interest charged by the ATO will become a true out-of-pocket cost. The longer you delay payment, the more you pay — with zero tax relief to offset it.

Why This Change Matters More Than You Think

If you have existing ATO debt or if your business tends to delay lodgements or payments, this rule increases your financial risk. This is especially concerning for small businesses already managing tight margins and cash flow pressures.

Late payments can now trigger a costly snowball effect:

  • Higher ATO interest costs

  • No tax benefit or deduction

  • Less cash to reinvest or cover operating expenses

What You Can Do Now to Reduce Risk

You don’t have to wait until the tax deductibility changes take effect to protect your business. Here’s how to stay ahead:

  • Review your current ATO obligations — know what you owe and when it’s due.

  • Pay down existing tax debt where possible to reduce interest exposure.

  • Stay on top of lodgements — avoid extra charges from late submissions.

  • Work with your business tax advisor to set up a realistic payment plan.

How BJT Business Advisors Can Help

At BJT Business Advisors, we help clients reduce tax stress, improve cash flow management, and stay compliant with Australian tax law. Our team can:

  • Explain exactly how the ATO tax debt changes affect your business

  • Identify strategies to reduce your overdue tax penalties

  • Help you set up systems to prevent future debt issues

We also specialise in helping small business owners claim smarter, find hidden deductions, and keep more of what they earn — while staying on the right side of Australian business tax rules.

Want to protect your cash flow and reduce your risk?

Book a free assessment or contact our friendly team today to strengthen your tax position and take control of your business finances.

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We will nurture your freedom to succeed by supporting you to make sound financial decisions every step of the way. We work with business owners through all business stages and with business of all sizes.