The ATO Doesn’t Want to Be Your Bank Anymore: Here’s How to Take Back Control

The ATO Doesn’t Want to Be Your Bank Anymore — Here’s How to Take Back Control

The Australian Tax Office has drawn a line in the sand: “We don’t want to be your bank anymore.”

With more than $105 billion in outstanding tax debt across the country and costs rising everywhere, this shift is pushing self-employed Australians and business owners to take back control of their cash flow and explore smarter finance options.

For years, many treated ATO payment plans as a convenient form of short-term funding — you’d pay interest, but you could also claim that interest as a tax deduction.

From 1 July 2025, that benefit disappears.

What’s Changing — and Why It Matters

Under the Treasury Laws Amendment Act 2025, interest charged by the ATO will no longer be tax-deductible. This includes:
• General Interest Charge (GIC)
• Shortfall Interest Charge (SIC)
• Interest on early or overpaid tax

The change applies to all companies, trusts, and small businesses from the 2025–26 financial year onward.

The ATO’s GIC rate currently sits at 10.78%, compounded daily — far higher than most business or home loan rates.
Once the deduction is removed, that 10.78% becomes a full after-tax cost, eating directly into your profit and cash flow.

What We’re Seeing on the Ground

Anthony Bacic, Senior Broker at Finstead Capital, says this shift is already prompting many business owners to act early.

“When the ATO charged interest, at least you could claim some of it back. That’s no longer the case, which means businesses are paying the full rate out of pocket.

“Refinancing that tax debt into a mortgage or business facility can cut the rate almost in half, restore cash flow flexibility, and potentially bring back deductibility if it’s structured for business use.”

What This Means for You

If you’re carrying ATO debt, you’re now paying premium-level interest on a loan that gives you no tax benefit.
Refinancing into a properly structured loan could help you:

• Cut your interest rate from 10.78% → around 6.5%
• Spread repayments over a longer term
• Make interest tax-deductible again (when used for business)
• Free up cash to reinvest in your business

It’s not about taking on more debt — it’s about replacing expensive, non-deductible ATO debt with smarter finance that works for you.

ATO Debt vs Refinance — The Numbers Speak for Themselves

Let’s compare how the numbers stack up on a $100,000 ATO debt.

OptionInterest RateTax DeductibleApprox. Annual InterestTermATO (GIC)10.78%No~$10,7801–2 yearsRefinance (Business or Home Loan)6.5%Yes~$6,500Up to 30 years

That’s an immediate interest saving of around $4,280 per year, plus the potential to claim the interest as a business expense if structured correctly.

Over several years, that difference compounds — freeing up working capital and creating long-term stability.

Even without compounding, refinancing spreads the cost over time and provides flexibility that the ATO simply doesn’t offer.

Refinancing doesn’t erase tax debt — it restructures it.
The key is to structure it properly to keep repayments sustainable and maintain deductibility.

Be Proactive, Not Reactive

Refinancing doesn’t erase your ATO debt; it restructures it.
Handled correctly, it can turn a high-cost liability into a manageable, tax-effective facility.

Before making a move, it’s essential to:
• Review your situation with a qualified finance broker
• Speak with your accountant about tax implications
• Ensure the structure keeps the loan deductible and sustainable

The Bottom Line

The ATO’s stance is changing — and with it, the cost of standing still.
High-interest, non-deductible tax debt can quickly drain your business cash flow if left unmanaged.

If you’ve been relying on ATO payment plans or simply haven’t revisited your debt strategy, now is the time to do it.
A short conversation with an experienced broker can help you understand your options, compare refinancing products, and put a smarter structure in place for the year ahead.

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