Business & equipment finance
ATO interest charges are no longer tax deductible: what the change means
26 September 2026 · 4 min read
For years, businesses and individuals could claim a tax deduction for the interest the ATO charged on late or underpaid tax. That changed from 1 July 2025. If you have a tax debt, or tend to run one from time to time, it's worth understanding what the change means.
What are GIC and SIC?
The general interest charge (GIC) is interest the ATO applies to tax that isn't paid by its due date. The shortfall interest charge (SIC) applies when an amended assessment increases the tax you owe for an earlier period.
What changed
According to the ATO, GIC and SIC incurred on or after 1 July 2025 are no longer tax deductible. This applies even if the underlying tax debt relates to an income year that started before that date. GIC and SIC incurred before 1 July 2025 can still be deductible for the 2024–25 and earlier income years.
Why it matters
When the interest was deductible, part of the cost of carrying a tax debt was effectively offset through a lower tax bill. Without that deduction, the after-tax cost of leaving a tax debt unpaid is higher than it used to be. That may change how you prioritise paying tax debts compared with other commitments.
What you can do
- Talk to your accountant or registered tax agent about how the change affects you
- Contact the ATO early if you can't pay in full; payment plans may be available, though interest generally keeps accruing
- Compare the cost of the options with your accountant, including any finance you're considering
- Set aside money for upcoming tax obligations as income comes in
Where finance fits
Some businesses and individuals consider using finance to clear a tax debt. That isn't automatically cheaper or better than an arrangement with the ATO. It depends on the rate, fees and term, whether any interest on the finance is deductible for you, and whether you can comfortably meet the repayments. Our article on dealing with a tax debt covers the options in more detail.
General information only
This article is general information only. It does not take your personal circumstances into account and is not personal credit, legal, tax or financial advice. Tax rules can change. For how the rules apply to you, speak with your accountant or registered tax agent, or check ato.gov.au. All finance is subject to lender assessment and approval.
The Finsterl view
If you've spoken with your accountant and want to understand whether finance could be part of the answer, call the Finsterl Finance team on 1300 508 827 or send us an enquiry. All finance is subject to lender assessment, eligibility criteria, terms and conditions.
Related finance
All finance is subject to lender assessment, eligibility criteria, terms and conditions. Rates and fees depend on individual circumstances.
Run the numbers
Estimate your repayments
Estimates only, but a good place to start a real conversation.
A balloon lowers the monthly repayment but increases total interest paid.
Estimated monthly repayment
$933.91
$215.68 per week equivalent
Amount financed
$45,000
Balloon at end of term
$0
Total of repayments (incl. balloon)
$56,034
Excludes lender and broker fees, which vary by lender and product.
This calculator provides estimates only and does not constitute financial advice, a finance approval or a guarantee of business performance. Actual repayments, costs and business outcomes may differ.
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