ATO Tax Debt Changes from July 1, 2025: What Australian Businesses Need to Know
Published: May 31, 2025
By Michael Pajar | Business Finance Broker | Casey Asset Finance | 0450 622 115 | michael@caseyassetfinance.com.au | Instagram: @casey_asset_finance
Estimated Read Time: 5 minutes
Massive changes to how tax debt is treated in Australia are just around the corner—and if your business owes money to the ATO, the real cost is about to climb. Here’s what you need to know to stay ahead.
Introduction
From July 1, 2025, the way the ATO treats tax debt will fundamentally shift. For many businesses, this will result in higher borrowing costs, increased pressure from the ATO, and less room for error when managing cash flow.
This blog post breaks down:
What’s changing and when
How it will affect your business
What you can do now to avoid getting caught out
Whether you’re currently managing ATO debt—or simply want to stay ahead—this guide will help you make informed, proactive decisions.
Key Changes from July 1, 2025
1. No More Tax Deductions on ATO Interest
Until now, interest charged on unpaid tax debts—like the General Interest Charge (GIC) or Shortfall Interest Charge (SIC)—could be claimed as a tax deduction.
From July 1, 2025, that benefit disappears.
This means:
You will no longer be able to claim ATO interest as a deductible expense
The effective cost of holding tax debt increases, potentially by thousands
For example, if you’re paying 11.15% interest on your ATO debt, that rate becomes the full cost—no deductions to soften the blow.
2. ATO Debt Recovery Is Getting Tougher
The ATO is shifting from patience to action.
After a few years of leniency during COVID-19, the ATO is now aggressively chasing outstanding debts. This includes:
More Director Penalty Notices (DPNs)
Garnishee notices (taking money directly from accounts)
Legal recovery action—including winding-up notices for companies with unpaid debts
This isn’t fear-mongering. It’s happening now—and will likely escalate even further after July 1.
What This Means for Business Owners
ATO Debt Is No Longer a “Cheap Loan”
Businesses often treat tax debt as flexible working capital. But with no tax deductibility and rising interest rates, it’s now one of the most expensive debts to carry.
Increased Risk of Cash Flow Pressure
Even a small delay in paying your BAS or PAYG could result in compounding interest—and put strain on your monthly operating cash.
Missed Payments May Trigger Legal Action
The ATO is back to enforcing compliance. Businesses that fall behind may not get a reminder—they’ll get a notice from a lawyer.
What You Can Do Right Now
1. Pay Down Tax Debt Sooner
Even partial payments reduce the interest charged. If possible, clear the balance before July 1 to take advantage of the final window where interest is deductible.
2. Set Up a Payment Plan
If you can’t pay the full amount now, speak to the ATO or your accountant about setting up a payment plan. This keeps you in the ATO’s good books and avoids further enforcement action.
3. Refinance Your ATO Debt
In many cases, using a business loan to pay out your ATO debt can save you thousands—especially if the new facility is lower-rate and tax deductible.
Brokers can often access low-doc options with:
No financials required
Fast turnaround (within 24–48 hours)
Repayments that suit your cash flow
4. Talk to a Broker Before the Deadline
If you’re unsure where to start, speak to a finance broker who understands the tax and lending landscape. A good broker will:
Workshop your profile before submitting any applications
Protect your credit score
Match your business to a suitable lender and product
Disclaimer: This article is for general education purposes only. It does not constitute financial or legal advice. For personalised guidance based on your circumstances, and to ensure you are working with the most current legislation and policies, please consult a registered tax professional or visit the official ATO website.
Take Action: Don’t Wait Until July 1
The changes are coming—and once they arrive, the cost of doing nothing gets higher.
If you currently owe the ATO, or want to understand your options before the rules change:
Call Michael at Casey Asset Finance on 0450 622 115
Or email: michael@caseyassetfinance.com.au
We’ll explain your options, protect your credit file, and help you secure a solution that relieves pressure—before it becomes a crisis.
Frequently Asked Questions
What’s changing from July 1, 2025?
ATO interest on unpaid debts will no longer be tax deductible. This includes the GIC and SIC.
How much is the ATO charging in interest?
As of now, the General Interest Charge (GIC) is over 11%, compounding daily.
Can I refinance my tax debt through a business loan?
Yes. In many cases, business loans can be used to clear ATO debt—potentially at a lower cost, with more manageable repayments.
Is it worth speaking to a finance broker?
If you owe tax or have received a notice from the ATO, a broker can help you assess your options and find a path forward quickly and privately.
Final Thought
Ignoring tax debt is about to become a very expensive decision.
The ATO isn’t waiting anymore—and starting July 1, every dollar in unpaid tax could cost you significantly more than it did last year.
Now is the time to get ahead. And if you’re unsure what steps to take, we’ll guide you through it with full transparency and no judgement.
Call or message today—we’re here to help, not to sell.
