Business owners must act ahead of new ATO payment plan rules: ScotPac
Thousands of businesses will soon face a critical decision on managing their tax debt with the commencement of stricter Australian Taxation Office (ATO) payment plan rules from July 1, 2025.
The most significant change is that interest charges on ATO payment plans will no longer be tax-deductible. That means the cost of tax debt management for thousands of Australian businesses will increase, unless they act fast and find an alternative solution.
The ATO’s General Interest Charge applies to unpaid tax debts, including income tax, fringe benefits tax, GST and PAYG. It currently stands at 11.17% for April-June 2025.
ScotPac CEO, Jon Sutton, said the loss of tax deductibility from July 1 would make ATO payment plans a very expensive option for Australian businesses.
“Business owners with an ATO payment plan – or those considering applying for one – must understand the impact of these new rules and the options available to them,” Sutton said.
“Smarter financing alternatives like business loans that act like a line of credit, invoice finance, or asset or equipment refinancing, will be a superior cash flow solution for many businesses.
“Unlike the ATO’s General Interest Charge, the interest payable on the full range of loans from providers like ScotPac will remain tax-deductible after July.
“They are also likely to have longer repayment terms and more competitive interest rates, giving businesses more chance to get on top of their debt and keep the doors open.”
- The Australian Tax Office (ATO) recently reported that total collectable debt stood at $53 billion as of 30 June 2024, and insolvency debt had increased from $11.3 billion to $14.3 billion, the highest growth rate since 2011.
- According to CreditorWatch data, almost a third of businesses with ATO tax debt defaults – defined as debts exceeding $100,000 that are over 90 days overdue – either become insolvent or voluntarily closed during 2024.
Sutton said for over 35 years, ScotPac has helped thousands of businesses optimise their cash flow in a range of critical business scenarios, including tax debt management.
“I urge any business owner with an ATO payment plan or a looming tax debt to talk with their key advisors about available options ahead of these new rules coming into effect on July 1, 2025,” Sutton added.
