From 1 July 2025, Australian businesses managing tax debt will face a significant shift in the cost of their payment arrangements with the Australian Taxation Office (ATO). In a move that is expected to impact thousands of businesses across the country, the ATO has announced that interest charges on payment plans will no longer be tax-deductible.

This change will directly affect the way businesses approach tax debt and cash flow management. If your business currently relies on ATO payment plans to manage obligations such as income tax, GST, PAYG, or fringe benefits tax, it’s time to take a closer look at your strategy.

What’s Changing?

At present, businesses that enter into payment plans with the ATO are charged the General Interest Charge (GIC) on outstanding balances. While the rate fluctuates quarterly, it is currently 11.17% for the April–June 2025 period – a rate that already places considerable pressure on businesses with ongoing tax liabilities.

Until now, these interest charges have been treated as tax-deductible expenses, softening the financial impact on business cash flow. However, from 1 July 2025, this will no longer be the case.

What this means in practice is that any business continuing to use an ATO payment plan after this date will not be able to claim interest charges as a deduction on their tax return. The result is a real increase in the net cost of managing tax debt, potentially affecting profitability and long-term financial planning.

What This Means for Your Business

This shift in policy underscores the importance of forward planning. If your business is currently relying on ATO payment plans—or may need to in the future—it’s crucial to reassess your financial strategy.

Some of the practical implications include:

• Increased cost of debt: The removal of deductibility means you’re paying the full interest cost without any offset at tax time.
• Strained cash flow: Higher costs may impact your ability to manage operational expenses or invest in growth.
• Pressure to seek alternative funding: Businesses may need to consider alternative solutions for managing tax and working capital needs.

Exploring Smarter Alternatives

At EDCORP Finance Solutions, we understand the unique challenges businesses face when navigating changes in tax policy and regulation. While we are not tax advisors and do recommend seeking independent advice tailored to your specific circumstances, we do offer funding options that can help relieve cash flow pressure when it matters most.

Cash flow lending can be a strategic alternative to ATO payment plans, especially when interest costs are becoming harder to justify. By working with non-bank and specialist lenders, we can help facilitate tailored solutions to cover tax debts—often with more flexible terms and in some cases, at more competitive interest rates compared to the ATO’s General Interest Charge.

This approach gives businesses the flexibility to stay compliant with their tax obligations without compromising operational cash flow. In an environment where interest deductibility is being restricted, having access to funding that suits your business’s cash cycle and growth plans can make all the difference.

Take Action Now

With these changes coming into effect in just a few months, the window for proactive planning is rapidly closing. Businesses that take early steps to explore their options will be in a stronger position to manage tax obligations without bearing the full brunt of increased interest costs.

If you’re concerned about how the removal of tax deductibility for ATO interest charges might affect your business, now is the time to assess your position and identify smart, strategic alternatives.

EDCORP Finance Solutions is here to support Australian businesses in navigating these changes with confidence. We work with a wide network of funders to deliver flexible finance solutions designed to meet your needs—without the red tape.

To find out how we can help simplify the process and support your cash flow needs, get in touch with us today.

Call us for a tailored finance solution or visit our website to learn more.