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Thousands of businesses across Australia will soon face a critical decision regarding their tax debt management as stricter Australian Taxation Office (ATO) payment plan rules come into effect from 1 July.
The most significant change is that interest charges on ATO payment plans will no longer be tax-deductible. As a result, the cost of managing tax debt for many businesses will increase unless they act swiftly and explore alternative solutions.
The ATO’s general interest charge (GIC) applies to unpaid tax debts, including income tax, fringe benefits tax, GST, and PAYG. As of April to June 2025, the GIC stands at 11.17 per cent.
ScotPac CEO Jon Sutton said that the removal of tax deductibility would make ATO payment plans a far more expensive option for Australian businesses.
“Business owners with an ATO payment plan – or those considering applying for one – must understand the impact of these new rules and the options available to them,” Sutton said.
“Smarter financing alternatives like business loans that act like a line of credit, invoice finance, or asset or equipment refinancing will be a superior cash flow solution for many businesses.
“Unlike the ATO’s General Interest Charge, the interest payable on the full range of loans from providers like ScotPac will remain tax-deductible after July.
“They are also likely to have longer repayment terms and more competitive interest rates, giving businesses more chance to get on top of their debt and keep the doors open.”
Recent reports from the ATO showed that the total collectable debt stood at $53 billion as of 30 June 2024. Insolvency debt had increased from $11.3 billion to $14.3 billion, the highest growth rate since 2011.
According to data from CreditorWatch, nearly a third of businesses with ATO tax debt defaults – defined as debts exceeding $100,000 that are more than 90 days overdue – either became insolvent or voluntarily closed in 2024.
Sutton said that for over 35 years, ScotPac has helped thousands of businesses optimise their cash flow in critical situations, including tax debt management.
“I urge any business owner with an ATO payment plan or a looming tax debt to talk with their key advisers about available options ahead of these new rules coming into effect on July 1,” Sutton said.
Announced last week (commencing 31 March), the Labor government announced an extension to the $20,000 instant asset write-off scheme by an additional 12 months, allowing small businesses with revenue of up to $10 million more time to make use of the measure.
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