The Australian Taxation Office (ATO) has issued an important update on the deductibility of interest paid on ATO debts. Starting 1 July 2025, interest incurred on ATO debts during income years beginning on or after that date will no longer be eligible for tax deduction. This change applies even if the debt was incurred in a prior income year.
However, the ATO has confirmed that interest charges for ATO debts incurred before 1 July 2025 will still be deductible. Therefore, taxpayers can still claim interest deductions for ATO debts before the new rules come into effect, but need to plan accordingly for the 2025 – 2026 financial year.
Additionally, the ATO has recommended that tax practitioners proactively discuss available options with their clients for settling overdue ATO debts. While the General Interest Charge (GIC) will continue to accumulate, paying off outstanding balances will help reduce the amount of interest charged over time.
If you have outstanding debts with the ATO, now is the time to explore your options for managing the debt and avoiding future interest increases. Walker Hill can provide the advice and support you need to navigate these changes effectively.
For expert guidance and to discuss your specific situation, contact us at 07 3367 3155 or support@walkerhill.com.au.
