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

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.

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

Filing taxes can be done personally or through a licenced agent. Image Credit: Pexels/Tara Winstead

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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.

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.

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.

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.

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.

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.

Sources

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  Primary source

  
  

  
  

  

  ATO tax bill warning as Aussies no longer able to claim $2,362 deduction

  Aussies have just weeks left to pay their tax bills or be hit with a bigger penalty.

  au.finance.yahoo.com
  
  



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  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.'

  
  

  
  

  https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/tax-professionals-newsroom/changes-to-deductibility-of-interest-on-ato-debts
  
  



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  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.'

  
  

  
  

  https://www.ato.gov.au/media-centre/ato-reminder-on-interest-deductibility-changes-from-1-july
  
  



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  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.'

  
  

  
  

  

  ATO Interest on Tax Debt No Longer Deductible 2025

  ATO interest on unpaid tax debts is no longer deductible from 1 July 2025. Learn what’s changed, what you can still claim, and how to manage tax debt.

  www.taxreturn.com.au
  
  




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  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.'

  
  

  
  

  

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

  From 1 July 2025, ATO interest is no longer deductible. Learn how to refinance your tax debt and protect your cash flow with Hudson’s help.

  hudsonfinancialplanning.com.au
  
  



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  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.'

  
  

  
  

  

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

  Carrying an ATO debt? From 1 July 2025, ATO interest charges are no longer tax deductible - even if the interest relates to a debt from before this date.

  marshpartners.com.au