Denying deductions for ATO interest charges

Taxpayers can no longer claim an income tax deduction for ATO interest charges incurred on or after 1 July 2025.

Last updated 5 June 2025

About this law change

On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it would amend the tax law to deny income tax deductions for ATO interest charges.

This is now law.

The law change applies in relation to assessments for income years starting on or after 1 July 2025. An assessment for an income year is how your income tax is calculated, as explained in your notice of assessment.

This means that you can no longer deduct GIC and SIC incurred on or after 1 July 2025 in your income tax return for income years starting on or after 1 July 2025.

Examples of when ATO interest charges are incurred

When you claim a deduction for ATO interest depends on when GIC or SIC is incurred. This is when you become liable for the interest charge. Examples of this include (but are not limited to):

GIC imposed on unpaid income tax liabilities is incurred on a daily basis.
SIC imposed on an unpaid income tax shortfall is incurred in the year you are served a notice of amended assessment.

ATO interest charges incurred before 1 July 2025

Any GIC or SIC already incurred prior to 1 July 2025 remains deductible for the 2024–25 and earlier income years.

For the 2024–25 and earlier income years, our guidance on calculating your ATO interest charge deductions, including how to verify pre-fill information, applies. For more information, see Calculate and report ATO interest.

If you have (or can) deduct GIC or SIC for the 2024–25 or an earlier income year and it is later remitted, the amount that is remitted will need to be included in your assessable income in the year in which the remission occurred.

ATO interest charges incurred on or after 1 July 2025

Any GIC or SIC incurred on or after 1 July 2025 is not deductible regardless of whether the debt relates to an earlier income year.

As they are not deductible, any GIC or SIC that is later remitted will no longer need to be included as assessable income.

Entities with a substituted accounting period

An entity's accounting period is ordinarily the 12-month period ending on 30 June.

You can seek leave from the Commissioner to adopt an alternative annual accounting period (known as a substituted accounting period or SAP).

If you have a SAP, these changes equally apply to you from your next accounting period starting after 1 July 2025.

More information

For more information, see:

QC73746