Recent changes to Australia’s tax regulations could significantly affect businesses carrying overdue tax debts. Beginning 1 July 2025, businesses with ATO (Australian Taxation Office) debt will no longer be able to claim ATO Interest as a tax deduction.

This change is a notable departure from the current structure, where businesses enduring financial challenges are allowed to deduct interest charges on overdue tax debts. Below, we provide a concise summary of what these tax reforms mean for business owners, why they matter, and steps you can take to prepare.

Why is This Change Significant?

When a business faces cash flow challenges and delays its payments to the ATO, the interest can add up quickly. Historically, the ability to claim these charges as deductions offered some relief.

With the upcoming reform, businesses with overdue tax debts will bear the full financial burden of these interest charges, placing additional pressure on their cash flow and profitability.

Preparing Your Business for the Reform

With thoughtful planning and proactive financial strategies, businesses can minimise the impact of the upcoming reform. Here are the essential steps to help you get ready:

1. Assess Your Tax Position

Review any overdue ATO debts, including interest charges and amounts across multiple accounts like GST, PAYG withholding and income tax debt.

2. Clear Debts or Consider Refinancing

Work toward clearing overdue debts by 1 July 2025. If repayment is challenging, explore refinancing options to manage debts more effectively.

3. Improve Cash Flow Management

Strengthen cash flow by regularly monitoring finances, forecasting expenses, and optimising receivables.

If your business is affected by these reforms—or if you’re unsure how they might impact you—don’t hesitate to reach out to our team today.