ATO Interest on Payment Plans No Longer Deductible from 1 July 2025

There’s a small but important tax change coming that could catch a lot of businesses off guard.

From 1 July 2025, the Australian Tax Office (ATO) will no longer allow you to claim the interest charged on payment plans as a tax-deductible business expense.

If you’ve ever entered into a payment plan to manage your BAS, income tax, or super obligations, you’ve likely noticed that the interest charged was tax-deductible—softening the blow just a little.

That’s changing.

What does this mean for business owners?

1. Pay Off Any Existing Payment Plans Before 30 June
If your business can afford it, now is a great time to look at any current ATO debts and assess whether you can clear them before the deduction disappears.

2. Plan Smarter for Future Tax Liabilities
This change makes it even more important to stay on top of your tax obligations. Interest is no longer “offset” by a deduction—so every dollar you pay in interest is now a pure business cost.

3. Build a Buffer for Tax Time
If you haven’t already, start setting aside money regularly for your BAS, PAYG and income tax bills. Use a separate high-interest savings account to keep these funds out of reach.

Need help reviewing your ATO position or planning ahead? Luxe Advisory can help you take control and keep the ATO off your back.