As Australian citizens, everyone has to abide by the laws of the land.

These laws, of course, include timely tax payments.

The Australian Taxation Office (ATO) recently announced a shift in how they will handle one significant concern among Aussies.

Starting 1 July 2025, the ATO will be enforcing heftier penalties on Aussies lagging in settling their tax bills.

The days of the interest applied on overdue tax debts being tax-deductible are numbered, as recently passed laws sealed this fate.

Legislation removing tax deductibility for both the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) was passed by the Senate last Thursday.

The change in legislation was ATO's huge move that could bolster tax revenue by $500 million in the fiscal years 2026 and 2027.

The new legislation about taxes should encourage Australians to settle their taxes in a more timely manner. Image Credit: Pexels/Nataliya Vaitkevich

What does this mean for the average Aussie, especially seniors?

Hripsime Demirdjian, the founder of Hive Wise, stated that this change will not be tax-beneficial for individuals and small businesses.

'The reason why this measure was introduced is because the ATO has more than $50 billion in collectable tax debt,' Ms Demirdjian stated.

'This change is being enacted in an effort to encourage the payment of tax debt on time, as the cost of debt will increase.'

Currently, the ATO imposes the General Interest Charge (GIC) when a tax debt has not been paid by the due date.

These charges include instances where a tax return has been lodged late.

Meanwhile, the Shortfall Interest Charge (SIC) could come into play when an incorrect self-assessment results in less tax being paid than actually owed.

The current GIC rate is at 11.17 per cent per annum, while the SIC is at 7.17 per cent per annum.

Both charges compound daily and were tax-deductible, offering a slight reprieve to Aussies.

The government first announced this impending change in December 2023, as they framed it as a way to encourage tax compliance.

These changes also aimed to reward taxpayers who consistently meet their obligations.

'Removing these deductions will enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so,' the government stated in the 2023-24 Mid-Year Economic and Fiscal Outlook (MYEFO).

However, not everyone is on board with this approach.

The Council of Small Business Organisations Australia (COSBOA) criticised ATO's latest move.

The COSBOA argued that it will disproportionately impact small businesses.

COSBOA's CEO, Luke Achterstraat, pointed out that the majority of small businesses strive to pay their taxes on time and correctly.

'Targeted measures to deal with high-debt accounts would be more appropriate and equitable to encourage voluntary compliance across the tax system,' Mr Achterstraat said.

Meanwhile, CPA Australia also argued that these changes could impact small businesses already dealing with inflation and high interest rates.

For those running small businesses or managing personal finances, this change underscored the importance of staying on top of tax obligations.

As 1 July looms closer, it's time to review any outstanding tax debts and consider settling them before the upcoming changes.

Proactivity is key, and with the right approach, you can avoid the sting of these increased costs.

Key Takeaways

• The Australian Taxation Office (ATO) is set to increase penalties for overdue tax debts, with interest applied on unpaid tax becoming non-deductible starting 1 July 2025.
• The removal of tax deductibility for General Interest Charge (GIC) and Shortfall Interest Charge (SIC) could generate $500 million in tax revenue in 2026 and 2027.
• This legislative change aimed to promote timely tax payments and level the playing field for compliant taxpayers.
• The Council of Small Business Organisations Australia (COSBOA) expressed their concerns that these measures could disproportionately affect small businesses.

What are your thoughts on this ATO crackdown? Have you been diligent with your tax payments, or are you concerned about how these changes might affect you? Share your experiences and thoughts with our community in the comments below.

 

[freedy50]

A very rich Putin

Has he paid his tax?

 

[IAN3005]

Has he paid his tax?

Gotta be kidding......

 

[jr59]

I’m sorry if you think our government is sending money (apparently, unnecessarily, from your response as I interpret it) to the Ukraine. I don’t see any correlation between helping a country whose citizens are being massacred and whose country is being destroyed by ‘mass murder Putin’ to the extent it will take many, many years to repair and rebuild. Compassion where it is due and help where we can.

I appreciate your perspective, and I agree that compassion matters. But my concern is about priorities and accountability. While Australians are being pursued for tax debts—some barely getting by week to week—the government is sending hundreds of millions overseas without real public consent or tangible benefit for us here.
Under the Rome Statute, which Australia is signed under, there's a serious question as to whether our support for foreign military efforts that harm civilians could make us complicit in war crimes. Why are we not holding our own government to international standards?
Meanwhile, we’ve got tens of thousands of homeless people in Australia, families who can't afford rent, and veterans sleeping rough. Shouldn’t we be taking care of our own before funding overseas conflicts?
And here's a fair question: If Australia were in crisis, would Ukraine—or any of these foreign nations—come rushing to our aid? I seriously doubt it. Charity begins at home. Our leaders would do well to remember that.

 

[jr59]

Such a miserable sod imo, how many gave their lives in WW2 for the same rights, how many Ukrainians etc, doing just that right now, let alone a few miserable dollars, grow up. Putin is the war criminal.

I appreciate your perspective, and I agree that compassion matters. But my concern is about priorities and accountability. While Australians are being pursued for tax debts—some barely getting by week to week—the government is sending hundreds of millions overseas without real public consent or tangible benefit for us here.
Under the Rome Statute, which Australia is signed under, there's a serious question as to whether our support for foreign military efforts that harm civilians could make us complicit in war crimes. Why are we not holding our own government to international standards?
Meanwhile, we’ve got tens of thousands of homeless people in Australia, families who can't afford rent, and veterans sleeping rough. Shouldn’t we be taking care of our own before funding overseas conflicts?
And here's a fair question: If Australia were in crisis, would Ukraine—or any of these foreign nations—come rushing to our aid? I seriously doubt it. Charity begins at home. Our leaders would do well to remember that.