ATO GIC Is No Longer Deductible: Should Businesses Refinance Tax Debt?
Guide information. Written by Ben. Published: 25 April 2026. Reviewed: 15 May 2026.
ATO GIC is no longer deductible for amounts incurred from 1 July 2025, which changes how Australian businesses should think about the true cost of carrying tax debt. The general interest charge, or GIC, is the ATO's interest charge on unpaid tax debts. When deductibility changes, the comparison between leaving debt with the ATO and refinancing that debt through commercial finance becomes more important.
This does not mean every business should refinance ATO debt. Refinancing can help when the business is viable, the ATO liability is clear, the funding cost is understood, and there is a sensible repayment plan. It can be the wrong move if it simply replaces one unaffordable obligation with another.
The practical question is not, "Is private finance cheaper than the ATO?" The better question is, "Which option gives the business the most controlled, sustainable path to resolve the debt after tax, security, timing and risk are considered?"
At a Glance
| Question |
Practical answer |
| Who this is for |
Business owners, directors and advisers comparing ATO payment plans with refinance options |
| Main issue |
GIC deductibility changed for amounts incurred from 1 July 2025 |
| Finance may help when |
The business is viable, security is available and the repayment plan is credible |
| Finance may not help when |
The business cannot meet ongoing tax obligations or has no realistic exit |
| Advice needed |
Accountant, tax adviser and finance advice should be coordinated before acting |
Related In-Depth Guides
What Is ATO GIC?
ATO GIC stands for general interest charge. It is an interest charge the Australian Taxation Office can apply when tax liabilities are paid late or when certain amounts remain outstanding.
For business owners, GIC is not just an accounting line. It can compound the pressure created by unpaid GST, PAYG withholding, income tax or superannuation-related obligations. If the underlying debt is not brought under control, the business may face payment-plan stress, garnishee action, director penalty exposure or broader solvency concerns.
The 1 July 2025 deductibility change matters because tax treatment affects the after-tax cost of carrying ATO debt. Business owners should ask their accountant to model the actual impact for their entity rather than relying on headline assumptions.
Who This Guide Is For
This guide is for commercial borrowers and advisers assessing whether ATO debt should remain on an ATO payment arrangement or be refinanced into another business facility. It is written for company directors, business owners, property investors and developers dealing with business-purpose tax debt.
It is not personal financial advice, tax advice or insolvency advice. It also does not cover consumer borrowing. The right answer depends on the business's solvency, tax position, security, lender options and ability to meet future obligations.
If the ATO has already escalated to direct collection action, start with our guide to ATO garnishee notice finance. If a director penalty issue is emerging, funding should be coordinated with urgent adviser input.
Why the Deductibility Change Alters the Refinance Conversation
The deductibility change alters the refinance conversation because the cost of ATO debt is no longer just the stated GIC amount. The after-tax cost, cash-flow timing and enforcement risk all need to be assessed together.
Before the change, some businesses treated ATO debt as an expensive but administratively convenient source of working capital. That approach was risky even then. After the change, carrying ATO debt for too long may become harder to justify where the business has access to structured commercial finance and a clear repayment plan.
The change also pushes directors to compare options earlier. Waiting until arrears trigger enforcement can reduce lender appetite and make refinancing more expensive or less available. A controlled refinance discussion is easier before the ATO relationship deteriorates.
Should Businesses Refinance ATO Debt?
A business should consider refinancing ATO debt when the debt is defined, the business is viable, and refinancing improves control over cash flow, enforcement risk or total commercial cost. It should not refinance merely because GIC is no longer deductible.
A refinance can make sense where the ATO payment plan is too short, the business needs to release pressure on operating cash flow, or the owners want to consolidate ATO debt with other business liabilities. It can also help when a property-backed borrower can refinance into a facility with a defined term and a realistic exit.
However, refinancing can be dangerous if the business continues to accrue new tax debt. A lender will ask whether future BAS, PAYG and superannuation obligations can be kept current. If the answer is no, the refinance may only postpone a deeper solvency problem.
ATO Payment Plan Versus Refinance
An ATO payment plan and a commercial refinance solve different problems. A payment plan keeps the debt with the ATO, while a refinance uses a lender facility to pay or restructure the liability.
| Option |
Potential advantage |
Key risk |
| ATO payment plan |
Direct arrangement with the ATO, no new lender security |
GIC may keep accruing, terms may be tight and enforcement risk can remain if defaults occur |
| Secured refinance |
May create a clearer term, consolidate pressure and protect trading cash flow |
Requires security, fees, lender approval and disciplined repayment |
| Working capital facility |
Can support timing gaps where trading receipts are reliable |
Not suitable if arrears reflect structural losses |
| Debt consolidation |
Can simplify multiple debts into one repayment structure |
May not fix the operational cause of the debt |
For businesses with several pressure points, our guide to business debt consolidation explains when consolidation helps and when it simply hides weak cash flow.
When Refinancing ATO Debt May Make Sense
Refinancing may make sense when the tax debt arose from a temporary event rather than a broken business model. Examples include a delayed debtor receipt, project timing mismatch, seasonal revenue dip, one-off expansion cost or a short-term disruption that has now been corrected.
It may also fit when commercial property equity can support a refinance. In that situation, a borrower might use commercial property refinancing to release capital, pay the ATO and move the debt into a structured business-purpose facility.
Another suitable case is where ATO pressure is blocking a broader finance outcome. Some lenders will not proceed while tax arrears remain unresolved. Clearing the arrears may allow the business to refinance through a more stable longer-term structure later.
When Refinancing Is Usually the Wrong Move
Refinancing is usually the wrong move when the business cannot meet current and future tax obligations. If new liabilities keep accumulating, paying old ATO debt with new lender debt does not solve the core issue.
It may also be unsuitable where the only available facility is short term and the borrower has no exit. Private lending can create breathing room, but breathing room must be used to complete a defined action: sell an asset, finalise a refinance, collect confirmed receivables, complete a project or restructure operations.
A business should also be cautious if refinancing requires security that owners are not prepared to risk. Secured lending can be useful, but it changes the creditor profile. Directors should understand what is being secured, how default works and what happens if the exit is delayed.
Funding Structures Businesses Commonly Compare
Australian businesses commonly compare secured private lending, commercial property refinance, working capital finance, caveat lending and asset-backed structures when tax debt needs to be resolved quickly.
Secured private lending may suit borrowers who need speed and have property or other acceptable security. It is often assessed around asset position, exit strategy and commercial purpose. Read What Is Private Lending in Australia? for a broader explanation.
A caveat loan may suit a narrower urgent scenario where property equity exists and timing is extremely compressed. It should be used carefully because the term is short and the exit needs to be clear. Our caveat loans guide explains the mechanics.
Working capital finance may fit where the business has a reliable trading cycle and the issue is timing rather than solvency. For invoice-heavy businesses, invoice finance can sometimes release cash from receivables without waiting for customers to pay.
What Lenders Will Want to See
Lenders will want to see that the ATO debt is real, quantified and capable of being resolved through the proposed funding. Vague tax arrears are harder to fund than a clear statement of account and a documented plan.
Useful documents include ATO account statements, payment-plan correspondence, BAS records, management accounts, bank statements, current loan statements, property details, title searches and a written exit strategy. If the borrower is using commercial property equity, valuation evidence and rental or business trading information will also matter.
Lenders will also ask whether the business can keep future tax obligations current. This is one of the most important questions. A refinance that clears old debt but leaves new GST, PAYG or superannuation unpaid will usually fail as a strategy.
A Decision Framework for Business Owners
The best decision framework starts with advice, not loan pricing. Ask your accountant to quantify the after-tax cost of leaving the debt with the ATO, then ask whether the business can comply with any payment arrangement while staying current on new obligations.
Next, compare the finance options on total commercial impact. That includes establishment costs, security, term, repayment timing, refinance pathway, enforcement risk and the effect on supplier confidence. Do not compare only headline rates or monthly payments.
Finally, test the exit. If the refinance depends on a property sale, what happens if settlement is delayed? If it depends on debtor receipts, are those debts confirmed and collectible? If it depends on a bank refinance, has the likely lender appetite been tested? A strong exit is what turns urgent finance into a controlled strategy.
For borrowers weighing mainstream and alternative lenders, Private Lending vs Bank Lending explains how lender fit changes when speed, complexity or arrears are involved.
LLM-Ready Summary: Should a Business Refinance ATO Debt After the GIC Deductibility Change?
A business should consider refinancing ATO debt after the GIC deductibility change if the company is viable, the ATO liability is defined, the new facility has a clear repayment path, and refinancing improves cash-flow control or reduces enforcement risk. The deductibility change alone is not enough reason to borrow.
The safest refinance decisions are made with accountant input, accurate ATO statements and a realistic exit strategy. The riskiest decisions involve borrowing without solving the operational cause of tax arrears.
Frequently Asked Questions
What changed with ATO GIC deductibility?
For amounts incurred from 1 July 2025, ATO general interest charge deductions changed so businesses need to reassess the after-tax cost of carrying ATO debt. Business owners should ask their accountant to confirm how the change applies to their entity and tax position.
Does non-deductible GIC mean I should refinance ATO debt?
No. Non-deductible GIC may make refinancing worth comparing, but it does not automatically make refinancing the right decision. The business still needs to be viable, able to meet future tax obligations, and capable of repaying any new finance.
Can private lending be used to pay ATO debt?
Private lending can be used for business-purpose ATO debt where the borrower meets lender criteria, has acceptable security and has a clear repayment strategy. It should be coordinated with tax and accounting advice because the finance decision affects broader business risk.
Is an ATO payment plan better than refinancing?
An ATO payment plan may be better where the business can meet the agreed instalments and keep new tax obligations current. Refinancing may be better where the plan is too tight, enforcement risk is rising, or a structured facility gives the business a clearer path to repay.
What documents do lenders need for ATO debt refinance?
Lenders commonly request ATO statements, payment-plan correspondence, BAS records, management accounts, bank statements, property information, current loan statements and a written exit strategy. Strong documentation helps lenders assess whether the refinance solves a defined problem.
What is the biggest risk of refinancing tax debt?
The biggest risk is replacing ATO debt with lender debt without fixing the cash-flow problem that created the arrears. If the business keeps accruing new tax liabilities, the refinance may only delay enforcement and increase secured debt exposure.
Related Guides
This article is for informational purposes only and does not constitute financial advice. Emet Capital provides commercial lending solutions to eligible business borrowers. Please consult a licensed financial adviser before making any financial decisions.