If you’ve ever made a late BAS payment or needed a bit of extra time to pay your tax bill, you’ve probably seen interest charges from the ATO. Until recently, these interest amounts—called the General Interest Charge (GIC) and Shortfall Interest Charge (SIC)—were tax deductible.

That’s about to change.

From 1 July 2025, interest charged by the ATO will no longer be tax deductible. Read more on the ATO website.

So what does that mean for your business?

What’s Changing?

Currently, the ATO charges interest when you:

  • Lodge and pay your BAS or income tax late
  • Have a payment arrangement in place
  • Underpay tax due to an amended return or audit

In the past, those interest charges were deductible, so they didn’t hurt quite as much at tax time.

But under new rules that apply from 1 July 2025, you won’t be able to claim a tax deduction on those charges anymore. That means late tax payments will cost your business more.

What You Can Do Now

If your business often runs late on BAS lodgements or income tax payments, this change should be a wake-up call. Now is the time to review your processes and make sure you’re not leaving compliance to the last minute.

Here are some practical steps to help:

  • Review your ATO Integrated Client Account (ICA) regularly—this is where interest charges show up.
  • Ensure your accounts are reconciled and your month-end reviews are up to date so that BAS and other lodgements can be submitted on time.
  • Set calendar reminders or delegate lodgement responsibility clearly to avoid due dates slipping through the cracks.
  • Speak to your advisor or agent if you’re relying on payment arrangements. It might be time to revisit your cash flow and budgeting.

We’ve previously written about the importance of regular month-end checks. If you’re behind on your BAS or unsure how to avoid ATO penalties, you can read more here:
What Should You Be Checking Each Month?

Final Thoughts

This change may seem small, but it adds an extra layer of cost for businesses that aren’t keeping up with their ATO obligations.

It’s one more reason to stay organised, get ahead of your lodgement schedule, and avoid interest charges altogether.

If you want to tighten up your tax-time processes or need help reviewing your ATO balances, we’re here to help.