With the RBA expected to lift rates today, borrowing costs are on every owner's mind. There is one lender whose interest bill many small businesses overlook: the Tax Office. If you have an overdue tax or BAS debt, the interest clock is running, and it costs more than most business loans.

The numbers

For the July to September 2026 quarter, the ATO's general interest charge (GIC) is 11.43 per cent a year, worked out daily at 0.03131507 per cent. It compounds daily on unpaid amounts until the debt is cleared, so a debt that sits for months grows faster than many people expect.

No more tax deduction

This is the part that catches people out. GIC incurred on or after 1 July 2025 cannot be claimed as a deduction, even if the debt relates to an earlier income year. In the past a business could claim the interest and soften the blow at tax time. That cushion is gone, so the full 11.43 per cent is a real cost. The same change means that if the ATO later remits some GIC, you do not need to include the remitted amount as income.

Why it matters right now

Higher interest rates elsewhere in the economy tend to squeeze cash flow, and tax debts are often the first bill to slip when money is tight. But an ATO debt is an expensive place to park your cash problem. A bank overdraft, even at a higher rate than last year, is often cheaper than leaving a tax debt unpaid, and it is deductible.

What to do

  • Check your ATO online services account for any overdue balances, including BAS, PAYG withholding and super charges, so nothing is a surprise.
  • If you cannot pay in full, contact the ATO before the due date rather than after. Engaging early puts you in a stronger position to arrange a payment plan.
  • If you are struggling because of a genuine hardship or delay outside your control, ask about remission of interest. It is a discretion, not a right, so keep your paperwork.
  • Compare the cost of borrowing elsewhere. Paying an ATO debt from a cheaper, deductible facility can save money, but only if you can keep up the repayments.
  • Build a tax savings buffer so the next BAS or instalment is covered on the day it falls due.

This article is general information only. If you have a large or complicated ATO debt, speak to your accountant before deciding how to fund it.