Tax updates following 2025 Federal Budget

There have been two key updates from the 2025 Federal Budget where Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 has received Royal Assent on 27 March 2025 which means they have officially passed into law.

The Act includes the following measures:

1. No More Tax Deductions for ATO Interest (from 1 July 2025)

After 1 July 2025 taxpayers will no longer be able to claim a tax deduction for ATO interest charges. This includes general interest charges (GIC) and shortfall interest charges (SIC) with respect to outstanding or late payments of income tax for income years both before and after 1 July 2025. General Interest Charge is levied on general outstanding tax debt where as Shortfall Interest Charge is applied to income tax shortfall arising from an amendment to a tax assessment.

The current ATO interest rate charged on outstanding debt is 11.17% at GIC rate and 7.17% at SIC rate. Given late payments will hit harder, staying compliant and proactive with lodgements will matter more than ever.

2. $20,000 Instant Asset Write-Off Extended

This measure will allow eligible small businesses (with an aggregated annual turnover of less than $10 million) to continue to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use on or before 30 June 2025. The $20,000 asset threshold applies to the cost of eligible depreciating assets, eligible amounts included in the second element of the cost of a depreciating asset, and general small business pools, until 30 June 2025. The $20,000 instant asset write-off for small business entities has been extended by 12 months until 30 June 2025.  

The threshold will revert to $1,000 from 1 July 2025 unless the measure is further extended for small businesses.