ATO Payment Plan Changes from 1 July: What Business Owners Need to Know
If your business has an ATO payment plan — or you’re considering one — there’s an important rule change starting 1 July 2025 that could significantly increase your costs.
From that date, interest charged on ATO payment plans will no longer be tax-deductible, making them far more expensive than many business owners realise.
Here’s what this means, what the risks are, and how to protect your business.
What’s Changing – And Why It Matters
The Australian Taxation Office (ATO) charges a General Interest Charge (GIC) on unpaid tax debts such as income tax, GST, PAYG, and fringe benefits tax.
As of Q2 2025, this interest rate sits at 11.17% — and from 1 July, that interest will no longer be tax-deductible.
Put simply:
If you’re on a payment plan, that 11.17% cost is now real money out the door — not a deductible expense.
Why This Affects So Many Australian Businesses
The ATO reported $53 billion in collectable debt as of 30 June 2024.
Insolvency-related tax debt has jumped from $11.3B to $14.3B — the fastest growth since 2011.
According to CreditorWatch, nearly one-third of businesses with unpaid tax debts over $100,000 became insolvent or closed in 2024.
This change couldn’t come at a worse time for businesses already under pressure.
Why ATO Payment Plans Might Now Be a Last Resort
While ATO payment plans can still help avoid default, they now come with real financial trade-offs:
The downside:
No longer tax-deductible
Shorter terms
Rigid repayment structures
Higher effective interest rate than many commercial loans
The result?
You may be paying more, for less flexibility, at the exact time when cash flow matters most.
What Are Your Better Options?
At Casey Asset Finance, we help business owners explore smarter funding solutions that remain tax-deductible and more cash-flow friendly:
1. Business Loans or Lines of Credit
Interest remains deductible
Flexible terms
Can be structured around revenue cycles
2. Equipment or Asset Refinance
Unlock equity tied up in machinery or vehicles
Can free up lump sums to cover tax debt
Interest deductible and assets remain in your control
3. Short-Term Working Capital Loans
Quick approvals (often within 24–48 hours)
Used to clear tax debt in full
Positions your business more favourably with the ATO
Why Timing Is Everything
From July 1, doing nothing becomes a more expensive decision.
But if you act early — even just to explore your options — you give yourself room to:
Avoid unnecessary interest costs
Improve your negotiation position with the ATO
Protect your credit file and business reputation
Let’s Talk Before July Hits
We know how stressful tax debt can feel. But you’re not alone — and the earlier you get the right support, the more flexible the outcome will be.
If this sounds familiar, or if you’re unsure what to do next — let’s explore what might be possible.
This article is for general information and educational purposes only. It does not constitute financial or tax advice. Please consult a qualified accountant or tax advisor before making decisions based on your business’s specific tax situation.
Explore our business finance solutions pages or send us a message to talk through your options confidentially.
