From 1 July 2025, ATO interest charges will no longer be tax-deductible. That change could significantly increase the cost of managing late tax payments, especially for businesses that rely on ATO payment plans as part of their cash flow strategy.
Right now, if your business falls behind on tax obligations like BAS, PAYG, or income tax, the ATO applies interest. While it’s never ideal, that interest has at least been tax-deductible, helping soften the financial hit.
But from next financial year, that tax benefit is gone.
The ATO will still charge interest (currently sitting above 11%), only now that cost becomes a direct expense with no offset at tax time. If you’re using ATO payment plans to manage short-term funding gaps, it’s about to become much more expensive.
Why This Hits Recruitment and Labour Hire Businesses the Hardest
Recruitment and labour hire businesses often deal with cash flow mismatches. You pay contractors weekly, but clients can take 30, 60 or even 90 days to pay invoices.
This timing gap has made ATO payment plans a common fallback. Businesses have relied on them to manage obligations and keep operations running smoothly.
Until now, the sting of ATO interest charges has been softened by the ability to claim them as a tax deduction. But from 1 July 2025, that’s no longer the case.
That means every dollar of interest becomes a true cost to your business, with no tax relief. At over 11 percent interest, that’s a high price to pay for delayed payments.
What Can You Do About It?
There’s still time to prepare before the rule change kicks in. Here are three smart steps to take now.
1. Stay ahead of your ATO obligations
Review your current tax payment habits. Make a plan to pay BAS, PAYG and super on time so you can avoid unnecessary charges.
2. Explore better funding options
If you’ve been leaning on ATO payment plans to manage cash flow, it’s time to rethink your strategy. Invoice finance is a smart, flexible alternative. It lets you unlock cash from unpaid invoices and the interest remains tax-deductible.
3. Improve your forecasting
Better visibility means better decisions. Forecasting your cash flow helps you prepare for tight spots before they hit and reduce the risk of falling behind on tax.
How APositive Can Help
At APositive, we understand the cash flow challenges recruitment and labour hire firms face. Juggling payroll, delayed payments and business growth is tough without reliable funding.
Our invoice finance solution gives you access to up to 85% of your unpaid invoices up front, helping you:
- Meet payroll without stress
- Pay ATO bills on time
- Avoid non-deductible interest charges
- Free up working capital to grow your business
You stay in control of your finances without relying on expensive tax payment plans.
Let’s Chat
Avoid the hit before it lands. We’ll help you set up a funding solution that works now and continues to work after the July 1 changes take effect.
Book a chat with our team today
