Big changes are on the horizon for Australian businesses in how they manage tax debt. From the 1st of July 2025, the Australian Taxation Office (ATO) will introduce a new rule that removes the tax deductibility of interest charges on payment plans. For thousands of business owners who rely on these plans to manage their tax bills, this shift signals the need for a new approach.
In this blog, OptiPay explores what this upcoming change means and why now is the time to rethink your strategy.
What’s Changing, and Why It Matters
Right now, the ATO’s General Interest Charge applies to unpaid taxes such as income tax, GST, and PAYG. That interest rate currently sits at 11.17% (April – June 2025) but up until now, it has been tax-deductible.
From July 2025, businesses will no longer be able to claim those charges as a deduction. Put simply, it’s going to cost you more to carry tax debt.
Because of this, businesses will need to be extra careful with cash flow, especially in terms of setting aside money for PAYG and super.
A Snapshot
The ATO recently revealed that collectable tax debt hit $53b by June 2024. Worryingly, insolvency-related debt has jumped from $11.3b to $14.3b, which represents the steepest increase since 2011.
And here’s a stat that should make any business owner pause: 1 in 3 businesses with large ATO tax debts (over $100,000 and more than 90 days overdue) went under in 2024.
What You Can Do About It
If your business is on an ATO payment plan or thinking about applying for one then we suggest scanning the market for other options.
There are plenty of financing alternatives that still allow interest to be claimed as a tax deduction, such as: business loans, invoice finance and asset or equipment refinancing.
These options aren’t just tax friendly, they’re often more flexible and cost effective too.
How OptiPay Can Help
At OptiPay, we work with Australian businesses every day to help them improve cash flow, reduce financial pressure, and stay ahead of their obligations.
We offer solutions like invoice finance, which lets you unlock cash tied up in unpaid invoices no need to wait 30, 60 or 90 days to get paid. As well as this, the interest on these facilities is still tax-deductible after 1 July.
With flexible terms, competitive rates, and a team that genuinely cares about your success, OptiPay can help you take control before these ATO changes kick in.
Blog in Summary
No one wants to fall behind on tax. With the upcoming tax deductibility changes, now’s the time to review your options, speak with your accountant or financial adviser, and put a proactive plan in place.
For many SMEs across Australia, invoice finance is proving to be a smart solution. By unlocking the cash tied up in unpaid invoices, businesses can access the funds they need without waiting for customers to pay.
This can significantly ease cash flow pressures, especially when facing tighter tax deadlines or rising operating costs. If you’d like to explore more effective ways to manage tax debt, boost liquidity, and stay ahead of ATO obligations, OptiPay can help.
