No More Tax Deductions for ATO Interest Charges from 1 July 2025

If you’ve ever had to pay interest on a tax debt, you might’ve been able to claim that cost as a deduction on your tax return. But that’s changing soon.

Starting 1 July 2025, the ATO is tightening the rules. You won’t be able to claim tax deductions for interest charges like the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) anymore. Let’s break down what this means for you.

So, What’s Changing?

From the 2025–26 financial year onwards, if you get hit with:

  • GIC – interest the ATO charges on unpaid tax debts

  • SIC – interest applied when your tax return is amended and you owe more tax

…you won’t be able to claim these charges as a deduction when doing your tax return. This applies regardless of when the original tax debt came from — if the interest is charged on or after 1 July 2025, it’s no longer deductible.

What If I Get the Interest Remitted?

Good news here: if the ATO waives or reduces these interest charges (called a “remission”), and the charges were originally not deductible, you don’t need to include that remission as income. In other words, you won’t get stung again.

But if the interest was from before 1 July 2025 — and was deductible — then yes, if the ATO later wipes it, you’ll need to include the remitted amount as income in the year it’s waived.

What Should You Do?

Here are some quick tips to stay ahead of the change:

  • Check your tax debts now. If you’ve got any, consider paying them before 30 June 2025 so any interest stays deductible.

  • Talk to your BAS Agent bookkeeper. They can help you manage your books and cash flow.

  • Talk to your Tax Accountant. They can help you plan your tax implications into the future.

  • Keep an eye on updates. The ATO may release more info as we get closer to the date.

Final Thought

This change is all about encouraging on-time tax payments. If you tend to let ATO debts sit for a while, that habit’s about to get more expensive. By getting on top of things early, you can avoid paying interest that won’t help you come tax time.

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