Denying deductions for ATO interest charges
Important Tax Update: ATO Interest Charges are No Longer Deductible After 1 July 2025
As part of the Federal Government’s 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), a new tax law has been passed that will impact
the deductibility of interest charges applied by the Australian Taxation Office (ATO).
What’s Changing?
From 1 July 2025, taxpayers will no longer be able to claim a tax deduction for ATO interest charges. This applies specifically to the:
- General Interest Charge (GIC), and
- Shortfall Interest Charge (SIC).
This change applies to all ATO interest charges incurred on or after 1 July 2025, regardless of whether the tax debt
relates to earlier income years.
Key Points to Note:
-
ATO interest charges incurred before 1 July 2025 will remain deductible under existing rules.
-
If previously deductible GIC or SIC is later remitted (i.e. waived by the ATO), it must be included in your assessable income in the year
it’s remitted.
-
From 1 July 2025, since GIC and SIC will no longer be deductible, any amounts later remitted do not need to be included as
assessable income.
What This Means for You
Now is a good time to review any outstanding tax debts and consider payment strategies ahead of 1 July 2025. If you’re currently managing ATO interest charges, acting before this date may help preserve existing tax deductions.
For more information from the Australian Taxation Office, click here
