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ATO Debt Rule Changes Prompt Surge in Business Loan Applications

Small Businesses Seek Financing Ahead of Non-Deductible Interest Charges

ATO Debt Rule Changes Prompt Surge in Business Loan Applications?w=400

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Recent changes to the Australian Taxation Office (ATO) debt regulations have led to a significant increase in business loan inquiries among small and medium-sized enterprises (SMEs).
Effective from 1 July 2025, general interest charges (GIC) and shortfall interest charges (SIC) on tax debts will no longer be tax-deductible.
With the GIC rate currently at 11.17% and compounding daily, this change has prompted many SMEs to seek alternative financing options to manage their tax liabilities.

According to data from the Loan Market Group (LMG), there has been a 486% rise in business finance inquiries related to tax debt in the 2024-25 financial year compared to the previous year. This surge indicates a proactive approach by business owners to restructure or refinance their tax debts before the new rules take effect.

Andrew Vitucci, a finance broker at My Lending Specialist, noted a shift in client behaviour due to the impending changes. He highlighted that while ATO debt has always been a challenge for small business owners, the ability to claim interest as a deduction previously provided some relief. With this option now removed, business owners are exploring other avenues to manage their tax obligations effectively.

For SMEs navigating these changes, it's essential to:

  • Review current tax debt and assess the impact of the non-deductibility of interest charges.
  • Explore refinancing options with financial institutions that offer favourable terms.
  • Consult with financial advisors to develop strategies for efficient tax debt management.

By taking proactive steps, small business owners can mitigate the financial impact of the ATO's new regulations and ensure the continued stability and growth of their enterprises.

Published:Friday, 14th Nov 2025
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

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Bond:
A fixed-income investment in which an investor loans money to an entity that borrows the funds for a defined period at a variable or fixed interest rate.