COSBOA Warns Against Changes to Interest Charge Deductibility for Small Business

The Council of Small Business Organisations Australia (COSBOA) is urging the Government to retain the tax deductibility of interest charges imposed by the Australian Tax Office (ATO) onto small business.

Luke Achterstraat, CEO of COSBOA, said removing the deductibility of the GIC (general interest charge) and SIC (shortfall interest charge) from 1 July 2025 was a punitive and radical departure from current practice that would impact small business the most.

“The overwhelming majority of small businesses are doing the right thing and seek to pay their tax on time and pay it correctly.”

“Targeted measures to deal with high-debt accounts would be more appropriate and equitable to encourage voluntary compliance across the tax system.”

“Introducing a blanket policy of higher costs is indiscriminate, punitive and undermines the cash flow of small businesses grappling with tough operating conditions.”

Achterstraat noted that many small businesses were frustrated in their tax dealings.

“Last year over one million calls to the ATO went unanswered, many of which came from time-poor and anxious small businesses trying to navigate a complex system.”

“The Government should prioritise better service delivery and engagement with small business users before treating them with contempt.”

Achterstraat echoed concerns raised by CPA Australia that the proposed non-deductibility of GIC would effectively raise the penalty rate by 25 per cent and up to 47 per cent for sole traders depending on the marginal tax rate.

“By making these interest costs on tax debts non-deductible, the proposal risks the ballooning of tax liabilities of small businesses to unsustainable levels, potentially threatening their viability.”

Achterstraat also agreed with CPA Australia that the goalposts were being moved.

“The ATO’s past sentiments to delay tax payments during the pandemic may not have been taken on by small business owners if they knew the GIC would later become non-deductible.”

“Is this really about repaying outstanding tax debt, or just a penalty on taxpayers struggling to do the right thing and meet their obligations?”

“The ATO risks biting the hand that feeds it if this policy is blindly pursued.”

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