ATO debt, interest, refinancing, and protecting your credit file

From 1 July 2025, ATO interest on unpaid tax debts will not be tax deductible for income years after this date, raising the after‑tax cost of carrying a debt and increasing the urgency to act given the ATO's change in approach to debt.  For you, this may mean:

•     A Higher net cost: Interest that was previously partly offset by deductions becomes fully out‑of‑pocket.

•     Faster escalation of debt amount: ATO interest compounds daily, so balances grow quickly if left unpaid.

•     Credit reporting and director exposure: The ATO may disclose overdue business tax debts to credit reporting bureaus (often with little notice) when a business has an amount overdue for more than 90 days and is not engaging to manage the debt; disclosure can harm the business’s credit profile and a director's future borrowing.

•     Enforcement Issues: For companies, director penalty notices, statutory demands and other recovery steps can follow prolonged non‑payment; these enforcement actions can affect directors’ personal credit and ability to obtain finance.

Options available:

Payment Plans - is one appropriate:

•     For smaller debts, a payment plan can be appropriate where you will be able to meet future BAS / IAS obligations.

•     A payment plan has the advantage of not being a formal loan which can avoid impacting your credit file.

•     It also avoids tying up property and other security which can impact your ability to borrow in the future. Also for small balances the ATO can remit interest (although this is subject to approval and is not guaranteed).

•     A key disadvantage is that if one obligation is missed, the payment plan is null and void and the ATO can re-commence enforcement action.  

Why refinancing can help (subject to credit criteria and approval):

•    Restore deductibility: Refinancing the ATO balance can make interest on that borrowing tax deductible in the right circumstances.

•    Lower, fixed costs and certainty: Commercial or mortgage finance may offer lower and more predictable rates than the ATO’s compounding charges, plus consolidated repayments that simplify cash‑flow management.

•    Risks: Deductibility depends on how the funds are used and your circumstances; lenders may require security or guarantees, and refinancing fees must be weighed against savings.

Quick action checklist:

•     Get the numbers: Total ATO balance, projected GIC growth and after‑tax cost.

•     Compare options: Include interest, fees, security and tax advice on deductibility vs. a short term payment plan.

•     Engage the ATO: Negotiate a payment plan or refinance to avoid credit reporting and limit enforcement risk.

•     Talk to us: As accountants and brokers, we can help with either option and reduce the stress on maintaining your ATO debt.  

Note: Simaco Partners is the trading name of Simaco Partners Pty Ltd
Registered Tax Agents and Accountants
ABN 95 626 806 175

Simaco Finance is the trading name of Direct Finance Solutions Pty Ltd. 
Stephen George Nikolovski is a MFAA Approved Broker (number 386328) and is a credit representative (number 500383) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit License 391237).
Direct Finance Solutions Pty Ltd is a credit representative (number 500306) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit License 391237).

Simaco Financial Advice is the trading name of Direct Financial Advice Pty Ltd which is the trustee of the Simaco Financial Advice Unit Trust ABN 91 753 408 234.  This company / trust and Stephen George Nikolovski are Authorised Representatives of Lifespan Financial Planning Pty Ltd ABN 23 065 921 735 Australian Financial Services Licence 229892.Disclaimer: The above is merely general commentary and is not a statement of fact or assertion of expected outcomes. It does not consider your personal circumstances. Please consider whether any proposed credit contract and what structure of loan (e.g. fixed or variable etc.) is appropriate for you and read any relevant disclosure statements and/or speak to an appropriately qualified legal professional / seek financial advice before proceeding with any course of action. Loans subject to approval and credit criteria, including any loan conditions imposed by the financier. If you wish to discuss your personal circumstances further, please again feel free to contact this office.This e-mail and any attachments to it (the "Communication") is intended for the individual or entity named and may contain information that is confidential. If you are not the intended recipient of the Communication, you are notified that any use or dissemination of this communication is strictly forbidden. If you have received this message in error, please notify the sender immediately by return e-mail, delete the Communication, and do not read, copy, print, retransmit, store or act in reliance on the Communication.

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Fraud Alert - The Australian Taxation Office has reported an increasing occurrence of fraudsters intercepting emails and inserting their bank account details in place of the intended account details. They have also reported a large number of scam callers with a recent example being someone who impersonated a tax agent of a client asking for them to pay tax into a new account, providing the BSB and Account number.  Do not act on ANY, verbal, email or SMS instruction purporting to change or alter previously provided Bank Account details of this firm or ATO payment details, and/or seeking payment into that changed or altered account, unless the account details are confirmed verbally (and subsequently in writing) by either George or Stephen of this office. We will not accept any responsibility or liability if you transfer money into an incorrect account or BPay details.  Please always double check the payment details and confirm if not sure.