The Australian Tax Office (ATO) has quietly become one of the country’s most expensive lenders.
In the 2023–24 financial year, the ATO collected $9.4 billion in interest charges from taxpayers who paid late, according to figures released via a Freedom of Information request reported by the Australian Financial Review. Just seven years earlier, the figure was $1.5 billion. Over the same period, overdue tax ballooned past $50 billion – a burden falling heavily on households and businesses.
The general interest charge (GIC) currently sits above 11 per cent per annum, compounding daily. That is significantly higher than most borrowing rates offered by banks. And unlike a bank, the ATO rarely allows more than two to three years to repay overdue amounts.
ATO cracks down on remissions
For many years, the GIC has existed as a deterrent to late payment. But its application has shifted in recent times. During the pandemic, the ATO was more flexible, taking account of hardship and external shocks. Waiver requests – known as remission applications – were approved in around 88 per cent of cases in 2022.
Since then, however, the trend has reversed. In 2023, approval rates dropped to 76 per cent. Tax professionals say that full remissions are far less common. Partial remissions – where only part of the charge is cancelled, often after lengthy negotiations – are now the norm.
Lawyers report that remission is generally only granted where there are clear, extraordinary circumstances such as natural disasters or serious health events. Administrative delays, supply chain issues or simple cashflow mismatches usually do not qualify.
The result is that many taxpayers who fall behind are now facing the full weight of a daily compounding, double-digit interest bill.
Overdue tax hits $50 billion and climbing
The escalation in ATO interest charges is closely tied to the ballooning of overdue tax itself. Collectable tax debt now stands at more than $50 billion, up sharply since the pandemic.
As ATO Assistant Commissioner Sonia Corsini told the Financial Review, “the amount of interest that is applied in a year is a direct product of the amount of debt that remains unpaid”. In other words, as the debt stock rises, the interest bill compounds.
The Taxation Ombudsman, Ruth Owen, has launched an investigation into the fairness and transparency of remission decisions, noting that many taxpayers complain of inconsistent treatment. Meanwhile, the ATO itself is running a parallel review of how penalties and interest are applied. Both are expected to report in early 2026.
Why you should not rely on the ATO
For businesses and investors, the broader lesson is clear: the ATO is not a lender, and using it as one is an expensive mistake.
A GIC above 11 per cent is far higher than most commercial borrowing rates. Business overdrafts, secured loans and even unsecured lines of credit from banks are usually cheaper.
On top of that, the ATO’s repayment terms are short – rarely more than two to three years. That is aggressive compared to the longer tenors often available from banks.
Put simply, treating the ATO as a source of working capital or investment funding is unsustainable. What might look like a temporary cashflow boost can quickly become a snowballing liability.
Tax debt now even more costly
Since 1 July 2025, the financial burden on taxpayers has increased again. The ATO has confirmed that GIC and shortfall interest charges incurred on or after that date are no longer tax deductible. In the past, businesses could at least soften the blow by claiming the cost against their taxable income. That relief has now disappeared – making the real cost of carrying tax debt even higher.
For small and medium-sized enterprises, which already account for much of the overdue tax pool, this change is hitting especially hard. According to ATO debt insights, SMEs make up the bulk of the $50 billion in unpaid liabilities, leaving them most exposed to compounding charges. Even a few months’ delay in paying Business activity statements (BAS) can translate into thousands of dollars in daily interest – with no deduction to offset the pain.
Cashflow discipline matters
At its core, this is not just a story about tax, but about cashflow management. The ATO’s stance may feel harsh, but it is predictable. Taxes are not discretionary, and leaving them unpaid will always carry a cost.
For business owners and investors, the practical response is straightforward:
- Set funds aside for tax, just as you do for payroll or rent. Even rough allocations reduce the risk of a shortfall.
- Do not rely on the ATO for liquidity – it is the most expensive credit line you can take.
- Engage early if problems arise. Negotiation is possible, but terms are usually capped at two to three years.
- Keep tax reserves separate from investment capital. Liquidity for obligations should never be tied up in long-term projects.
That discipline is not optional – the alternative is letting the tax office become your most costly creditor. Whether the challenge is rising prices or an unexpected tax bill, strong cashflow buffers are the best defence.
The most expensive creditor you can have
The surge in ATO interest charges – from $1.5 billion in 2017 to $9.4 billion in 2023–24 – is more than just a statistic. It represents billions of dollars in extra costs borne by taxpayers who were already under pressure.
It is also a reminder that while banks may be tough, they are almost always more flexible – and cheaper – than the ATO.
At more than 11 per cent, compounding daily, the ATO has become the most expensive creditor a business can have.
