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Mark your calendars: This key date could affect finances nationwide... including yours

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Mark your calendars: This key date could affect finances nationwide... including yours

pexels-davidpeterson-4359064.jpg Mark your calendars: This key date could affect finances nationwide... including yours
Australians are reminded of a key deadline to prevent any tax debt. Disclaimer: This photo is not reflective of the contents of the article. Image Credit: Pexels/David Peterson

The Australian tax landscape has shifted dramatically over the years—even decades.



If you're among the thousands of Aussies sitting on an unpaid tax bill, the cost of procrastination has just become eye-wateringly expensive.



With interest rates climbing and a major rule change taking effect, carrying Australian Taxation Office (ATO) debt is now more costly than most personal loans.




The November 21 crunch time

If you lodged your tax return yourself, you have until Friday, 21 November to pay your tax bill— regardless of when you actually submitted that return. If you miss the said deadline, the ATO will be knocking at your door for collections.



The ATO applies a General Interest Charge (GIC) for any unpaid tax after the said due date. The GIC is also compounding daily.




'Interest is accrued daily at 10.61 per cent at the moment and charged monthly. That's not tax-deductible anymore.'

- Belinda Raso, Tax Invest Accounting director



Tax advisor Belinda Raso also warned that missing the deadline means facing a 'whopping' amount of interest that keeps growing.




pexels-tara-winstead-7111519.jpg
Filing taxes can be done personally or through a licenced agent. Image Credit: Pexels/Tara Winstead

The game-changing rule that's costing taxpayers thousands

Starting 1 July 2025, interest charged by the ATO for late payments will no longer be tax deductible, thanks to the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 now being law.



More than 302,000 taxpayers claimed ATO interest as a tax deduction in the year 2022-2023, with the average deduction worth $2,362.



From July 2025, that safety net disappears entirely.




Key Changes from July 1, 2025



  • No tax deductions for ATO interest charges (GIC)

  • Rule applies even if the original debt was from before this date. Only interest incurred before July 1, 2025 remains deductible.

  • Meanwhile, higher after-tax cost makes ATO debt more expensive than most commercial loans.




With ATO interest rates exceeding 10 per cent, carrying tax debt is now more expensive than most commercial loans.



Your escape routes—but time is running out​

If you're feeling the squeeze, you're not powerless. The ATO has several lifelines, but for a limited time only.



Hiring a registered tax agent can help you with your concerns.




Lodge with an agent and you can defer payment until:



  • March 21, 2026 (if lodged before February 12, 2026)

  • April 21, 2026 (lodged February 13—March 12, 2026)

  • June 5, 2026 (lodged after March 13, 2026)




The ATO encourages taxpayers with debt to make payment as soon as possible to reduce interest charges. If you can't pay in full, payment plans remain available through myGov—provided you haven't defaulted before.




Act now to minimise damage


Contact ATO or your tax agent immediately if you can't pay by November 21—Apply for payment plans online through myGov (if eligible).


Consider third-party financing—it might be cheaper than ATO interest—Don't wait until after the deadline when the ATO becomes less generous.


Discuss alternative funding methods with your accountant or finance provider, as these might offer lower interest rates than the ATO's charges.




Who's feeling the ATO's enforcement?

This change will have a major impact on high-income earners, SMSF trustees, and business owners who have outstanding ATO debts. The after-tax impact becomes greater as your tax rate increases.



Common culprits behind tax debt include Medicare Levy Surcharge for higher income earners, households with multiple jobs without coordinating tax-free thresholds, Unreported HECS debt affecting withholdings and insufficient tax instalment payments for business income.



Raso warns that once 21 November passes, the landscape may shift dramatically.



'When they're chasing you, it's a lot more aggressive and they're not going to be as generous,' she explained. The ATO receives thousands of calls from overdue taxpayers after deadlines, putting them in a weaker negotiating position.



With deductibility changes starting July 1, it's more important than ever to keep on top of ATO obligations. The office that was once understanding about payment difficulties may become far less accommodating when dealing with the post-deadline rush.



Planning ahead

Smart taxpayers are looking beyond November 21 to prevent future tax debt.




Key strategies to prevent tax debt



  • PAYG withholding adjustments: If you're working multiple jobs, ensure only one employer applies the tax-free threshold.

  • Quarterly instalment reviews: Business owners and investors should regularly review their PAYG instalments to avoid year-end shocks.

  • HECS debt declarations: Notify your employer about student debt to ensure adequate withholdings.



What this means for your wallet

A $10,000 tax debt attracting daily compounding interest could cost approximately $1,200 in interest over 12 months—and from July 2025, none of that will be tax deductible. For someone in the 37 per cent tax bracket, that's an additional $444 in after-tax cost compared to previous years.



Did you know?


The ATO's General Interest Charge rate is recalculated quarterly and has been trending upward. At over 11%, it's now higher than most credit card rates and significantly exceeds home loan interest rates.



The bottom line


With November 21 approaching fast and major rule changes taking effect in 2025, the window for damage control is closing rapidly. Whether you're facing a few thousand dollars or a more substantial debt, acting now—rather than hoping the problem disappears—could save you thousands in interest and preserve your relationship with the ATO.



Interest charged before July 1, 2025 can still be claimed as a deduction, but every day you delay increases both your debt and reduces your options.



The message from tax professionals is clear: if you're going to have a tax bill, either engage a tax agent for the deferral benefit, or lodge yourself and immediately arrange a payment plan. The ATO's generosity diminishes significantly once deadlines pass.



Have you been caught off-guard by a tax debt this year, or do you have strategies that have worked for managing ATO payments? Share your experiences and tips in the comments below—your insights could help fellow readers navigate these challenging changes.






  • Primary source






  • Changes to deductibility of interest on ATO debts | Australian Taxation Office

    Cited text: 'We apply GIC if an amount of tax or another liability remains unpaid after the due date. The rate is currently 11.17% and it compounds daily.'


    Excerpt: 'The ATO applies General Interest Charge (GIC) if any tax amount remains unpaid after the due date, currently at 11.17% compounding daily.'







  • ATO reminder on interest deductibility changes from 1 July | Australian Taxation Office

    Cited text: 'The Australian Taxation Office (ATO) is reminding taxpayers, from 1 July 2025 interest charged by the ATO for late payments or underpayments will no l...'


    Excerpt: 'From 1 July 2025, interest charged by the ATO for late payments will no longer be tax deductible, thanks to the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 now being law.'







  • ATO Interest on Tax Debt No Longer Deductible 2025

    Cited text: 'With ATO interest rates exceeding 10%, carrying tax debt is now more expensive than most commercial loans. This change will tighten cash flow for many...'


    Excerpt: 'With ATO interest rates exceeding 10%, carrying tax debt is now more expensive than most commercial loans, creating significant cash flow pressure for small businesses.'








  • From 1 July 2025, ATO Interest Will No Longer Be Tax Deductible — What You Need to Do Now

    Cited text: 'This change could have a major impact on high-income earners, SMSF trustees, and business owners who have outstanding ATO debts.'


    Excerpt: 'This change will have a major impact on high-income earners, SMSF trustees, and business owners who have outstanding ATO debts.'







  • Tax deductions for ATO interest charges scrapped—Your Trusted Accountants In Brisbane, QLD

    Cited text: 'As these interest charges are no longer deductible, this means that the after-tax impact of the charges is higher for many taxpayers.'


    Excerpt: 'The after-tax impact becomes greater as your tax rate increases.'






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