Taxpayers warned of 10pc interest charge as ATO payment deadline looms
The clock is ticking for a large number of Aussie taxpayers who must settle their ATO debts by Friday or risk harsh interest rate penalties.
Those slapped with tax bills last financial year are being warned they have just days to pay it off before they face significant interest costs.
Australian taxpayers who prepared their own tax return and received a tax bill must pay before Friday, 21 November.
Any amounts not paid, or without a payment plan in place, will attract a General Interest Charge (GIC), compounded daily – as of Q2 2025, the GIC sits at 11.17 per cent per annum.
“(The ATO) have just gone hell for leather this year,” Tax Invest Accounting director Belinda Raso told news.com.au.
MORE: ‘Legit’ Aussie tax secrets revealed
“They’re trying to recoup all of their debt because their debt is over 100 billion dollars, so they’re not allowing their books to go any higher this year.”
The Australian Taxation Office said a general interest charge will be added automatically to overdue tax debt.
“Your debt will grow each day your debt remains unpaid,” a spokesperson said.
“GIC applies at law for all overdue tax debts, regardless of the value of tax owed.
“Interest calculates on a daily compounding basis on the amount overdue and is added to your account periodically.”
The ATO spokesperson confirmed taxpayers can no longer claim an income tax deduction for interest charges incurred on or after July 1, 2025.
Those experiencing financial difficulties may be eligible to set up a payment plan, they added.
“It is important to note that interest continues to apply for the amount outstanding, and the sooner you pay your debt in full, the less interest you pay,” the spokesperson said.
“If you know you will be unable to pay your tax debt by the due date, contact the ATO as soon as possible before the due date.”
Ms Raso said those who aren’t able to pay in full upfront should contact the ATO “immediately” and arrange a payment plan.
A recent rule change means interest rates are also no longer tax-deductible, Ms Raso added.
“Up until June 30, 2025, interest was automatically deductible on your next year’s tax return -they have now changed that,” she said.
“So from July 1, 2025, any interest charged by the ATO is no longer an automatic deduction on your return.
“They will allow you to actually outsource that debt, so saying go and get a personal loan or credit card, the amount of interest that you’re paying on that particular part of the debt is going to be claimable.”
The ATO confirmed this is not applicable to individual taxpayers, only businesses and individual taxpayers cannot claim interest on commercial loans taken out to pay off ATO debts.
Ms Raso said the ATO will no longer allow taxpayers to “use them” as a credit card or a loan facility anymore.
Those with additional income – such as interest from the bank, an investment property or a side hustle – with instalment income over $4000 and tax payable on their last return is $1000 or more, or your estimated tax is $500 or higher, means being automatically entered into the pay-as-you-go instalment program.
“This is not something that you want to ignore,” Ms Raso said.
“They will be asking for your tax return amount, the tax debt amount from 2025 over the next four quarters in this financial year.
“Even though you’re in a Payment Plan, they can and will still charge you interest as well.”
It comes after the ATO cracked down this tax time with Aussies who missed the October 31 deadline to lodge their tax return slapped with a $330 fine for every 28 days their lodgement was late, with a maximum penalty of $1650.
In the ATO’s 24-25 Annual Report, the total amount of penalties charged to taxpayers was $4.64 billion with $250 million remitted.
No leniency was offered this year, with Ms Raso warning taxpayers not to “tempt fate”.
“In previous years, the ATO have stated that if you’re getting a refund, they generally won’t impose a failure to lodge penalty … but there’s been a sharp increase in the amount of taxpayers that have actually been penalised the failure to lodge,” she said.
“They’re not mucking around.”
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Originally published as Taxpayers warned of 10pc interest charge as ATO payment deadline looms
