Until now, businesses and individuals could claim this interest as a tax deduction — softening the financial blow of paying late. But once the new rule kicks in, that buffer disappears, making ATO debt significantly more expensive to carry.

With over $50 billion currently owed to the ATO, this change is set to hit a lot of people — especially small business owners and high-income individuals.
Here’s what the numbers look like:
• Small businesses: The effective cost of ATO interest will rise from 10.78% to 14.37%.
• High-income individuals: The rate jumps even higher — an effective 20.33% after taxes.
Experts warn this could push already struggling small businesses closer to insolvency. CPA Australia, a leading industry body, says the change will amplify financial hardship at a time when businesses are already battling high inflation and tight credit conditions.

If you have outstanding ATO debt, act now. Waiting until after 1 July 2025 means you’ll lose the ability to claim interest on that debt as a tax deduction, and your financial burden will grow.