What’s the deal?

From 1 July 2025, small businesses will no longer be able to claim tax deductions on interest charged by the ATO for unpaid tax debts.

This change (now legislated) applies to General Interest Charges (GIC) and Shortfall Interest Charges (SIC)—two types of interest the ATO applies when businesses pay late or underpay their tax. Until now, these charges were tax-deductible. Soon, they’ll become a straight-up cost.

And for businesses already dealing with ATO debt, that cost could be significant. Current figures show the ATO is owed around $52 billion, with $34 billion of that sitting with SMEs.

For businesses trying to manage tight margins and rebuild momentum, this is a shift that makes holding tax debt even more expensive. It's a timely reminder to review your position and consider your options early.

The financial impact—broken down

Here’s a quick example of what the ATO’s change will mean for small businesses financially:

This small business will be paying $2,500 more just in lost tax benefits in the new financial year. For businesses juggling tight margins, that money could be better spent on supplier payments, payroll, stock, or simply easing day-to-day cash flow pressure.

Why this matters

On paper, it sounds like a technical adjustment. In practice, it’s another pressure point for businesses already dealing with rising costs and an unpredictable market.

At Bizcap, we’ve seen this up close. Our latest research found:

  • 60% of respondents report ongoing difficulty managing cash flow
  • Over half indicate that cash flow pressures are currently having a significant impact on their business operations
  • And more than 90% have faced a serious cash flow challenge at some point

When tax obligations pile up, some business owners have little choice but to delay growth—hitting pause on investments, new hires, equipment upgrades, and opportunities to    reinvest in the parts of your business that drive growth.

Bizcap can help you clear tax debt fast—so you can get back to business and stay focused on growth.

Exploring your options ahead of the change

If your business is managing ATO debt and you're considering your next steps, it’s worth speaking with a trusted financial adviser or accountant to understand how the upcoming deductibility changes may affect you.

At Bizcap, we work with small businesses that need funding fast—particularly for time-sensitive situations like paying down tax debt. In many cases, we can pay the ATO directly, which may help ease immediate cash flow pressure and reduce further interest accrual.

While some lenders view tax debt as a barrier, our approach looks at the broader picture. We don’t automatically rule out businesses with ATO obligations—we assess each situation on its own merits to see if we can provide a funding solution that fits.

This isn’t financial advice. But if funding could be part of the way forward, we’re here to talk through your options.

What now?

If your business has outstanding tax debt and you’d like to explore how we can help—now’s the time to take action.

Call us on 1300 922 223 or start your application online, it only takes a few minutes.

Learn more about the ATO changes coming into effect on July 1st here.

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