If your business is carrying a bit of tax debt, now’s the time to sit up and take notice. From 1 July 2025, the interest the ATO charges on unpaid tax bills – known as the General Interest Charge (GIC) – will no longer be tax deductible. That means your tax bill just got a whole lot more expensive.

According to the finance experts at Valiant, this sneaky little change could see small businesses paying thousands more in interest, with nothing back at tax time to soften the blow.

“At the moment, most businesses are only feeling around 75 per cent of the sting from ATO interest because they can deduct it come EOFY,” explains Alex Molloy, CEO and co-founder of Valiant Finance. “But from 1 July, they’ll be copping the full 11.17 per cent – and that’s compounding daily.”

Yep, you read that right. Over 11 per cent interest, compounded daily. And with unpaid ATO debts across the small business sector sitting at a whopping $35.2 billion, it’s not a small issue.

A lot of businesses fell into the habit of letting tax debts build up during COVID, thanks to the ATO easing off on collections. But that grace period is over – and using the tax office as your unofficial line of credit? That’s about to get pricey.

“For a business with $50,000 in ATO debt, you’re looking at over $5,500 a year in interest alone,” says Molloy. “That’s more than $15 a day going out the door – and none of it tax deductible.”

So, what can you do?

Valiant is urging business owners to take action before the end of financial year. Here are their top three tips:

Talk to the ATO now – Ideally through your tax agent, who’s likely to have more sway when it comes to negotiating payment plans.

Rejig your cash flow – See if you can prioritise your tax bill before the 30 June cut-off.

Think about refinancing – Swapping your ATO debt for a regular business loan might sound odd, but it could actually save you money. Business loan interest stays tax deductible, and you can usually stretch repayments over a longer timeframe.

“Refinancing often means lower monthly repayments, plus you keep the tax deductibility,” Molloy adds. “It’s about easing the pressure now, and setting your business up to be in better shape down the track.”

Time’s ticking

With less than two months to go, it’s worth crunching the numbers now and seeing where you stand. Even if you can’t pay off the debt in full, getting a plan in place could save your business thousands – and a whole lot of stress.

“This isn’t just about avoiding additional costs, it’s about positioning your business for stronger financial health and better financing options in the future,” says Molloy.

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