ATO Debt Interest No Longer Deductible
Quick Reminder:
ATO Debt Interest No Longer Tax Deductible from 1 July 2025
We’ve already posted about this on our social channels, but just a quick reminder: from 1 July 2025, interest on outstanding ATO debts will no longer be tax deductible. This change makes ATO debt a lot more expensive to carry, and with the ATO’s tougher stance on debt collection, it’s more important than ever to stay on top of payments.
The ATO’s Mood Has Shifted
Over the past few months, we’ve seen a significant change in how the ATO is handling tax debts:
Interest & Late Lodgement Penalties Are Harder to Reverse – Historically, the ATO has been fairly flexible in waiving penalties, but that’s no longer the case. If you accrue interest or penalties, assume they will stay.
Tougher Payment Plan Negotiations – If you’ve defaulted on a payment plan before, securing a new one is now much harder.
What Can You Do?
With this shift in policy and attitude, here’s what we recommend:
Refinance ATO Debt to Bank Debt – Unlike ATO interest, bank loan interest is still tax deductible in many circumstances. So, it may be wise to refinance tax debt with a lender. This won’t apply to every circumstance, however, so if you are considering this as an option, make sure you reach out to us to ensure that you maximise the tax deductibility of any debt.
Prioritise Timely Payments – More than ever, it’s crucial to pay ATO debts on time and stick to any existing payment plans.
Don’t Expect Interest Back at the End – In the past, some businesses have relied on reversing interest after settling their debt. That’s becoming increasingly unlikely.
The Bottom Line
If you have ATO debt, now is the time to review your strategy. Make sure you’re paying on time, sticking to payment plans, and exploring refinancing options where possible. If you need help navigating these changes, get in touch with us – we’re here to help!
📧 hello@fenwickcollective.com.au
📞 07 5630 1586