$35B in ATO Debt Just Got Pricier — What Small Businesses Need to Know Before EOFY
Thousands of Australian small and medium-sized businesses face higher ATO debt costs in just weeks, as a key tax deduction disappears on 1 July.
From the start of the new financial year, interest paid on ATO debts will no longer be tax-deductible, removing a longstanding financial relief for businesses managing overdue tax bills. This change comes into effect just as businesses and individuals begin lodging their tax returns — adding pressure at a time when many are already stretched.
Until now, the tax-deductibility of ATO interest charges has effectively reduced the real cost of interest by around 25% for most businesses. With that benefit removed, many businesses could see a meaningful increase in the cost of carrying ATO debt — an impact many haven’t yet factored into their cash flow or budgeting plans.
For example, a business with $50,000 in tax debt could soon be paying over $15 per day in non-deductible interest — a cost that adds up quickly and eats into already-tight margins.
ATO Debt Levels Rising
This shift comes as total ATO small business debt has ballooned to over $35.2 billion, underscoring the scale of the challenge. For many business owners, this legislative change makes the approaching EOFY deadline far more urgent — and missing it could mean thousands in extra interest charges in the coming year.
Three Actions Businesses Should Take Before 30 June
To avoid a financial hit, small businesses should act now. Here are three key steps to take before the end of the financial year:
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Review Your ATO Debt Position
Understand exactly how much you owe and what portion of that may start attracting non-deductible interest from 1 July. -
Seek Tax or Financial Advice
Speak with your accountant or financial adviser to assess your options — including refinancing, payment plans, or accelerating repayments before EOFY. -
Improve Cash Flow Management
Tighten invoicing and payment cycles, reduce unnecessary expenses, and explore government support programs to strengthen your cash reserves.
Final Word
With higher ATO debt costs just around the corner, proactive planning now could save businesses thousands in the coming year. Don’t let 1 July arrive without a clear strategy in place.
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