For years, businesses had a small safety net if they fell behind on tax: the interest charged by the ATO could be claimed as a deduction, softening the cost of a late or shortfall payment. That safety net is gone. From the 2025/26 income year onward, general interest charge (GIC) and shortfall interest charge (SIC) are no longer tax-deductible — and it’s a change worth understanding before it costs you more than you expect.

What’s Changed

Previously, if you paid tax late or had a shortfall identified after an amendment, the interest the ATO charged could be offset against your taxable income like any other business expense. Now, that interest is a pure, non-deductible cost. If you underpay your tax or miss a deadline, whatever interest accrues comes straight off your bottom line with no tax benefit to soften it.

Why This Matters More Than It Might Seem

It’s easy to think of ATO interest charges as a minor administrative penalty. In practice, this change quietly increases the real cost of:

• Late BAS or tax payments — even short delays now cost more in real terms than they did last year.
• Amended assessments — if the ATO reassesses a prior return and identifies a shortfall, the interest on that gap is no longer offsetting your tax bill.
• Cash flow shortfalls — businesses that have historically used late tax payment as an informal cash flow buffer will find that approach meaningfully more expensive now.

This Connects to Other 2026 Changes

This shift lands at the same time as several other compliance changes — including Payday Super and expanded digital reporting — that increase the ATO’s real-time visibility into your obligations. Reporting is becoming faster and more automated, which means the window for “catching up quietly” on late payments is shrinking, and the cost of not doing so has just gone up.

Business growth is a good problem to have — but it comes with reporting obligations that catch a lot of business owners off guard. As your turnover climbs past certain thresholds, your GST reporting requirements change automatically, whether you’ve updated your systems or not. The ATO has flagged that a number of businesses are missing this, so it’s worth checking where you sit right now.

The Two Key Thresholds

As your business turnover climbs, there are two primary milestones that trigger automatic changes to your GST reporting obligations:

$10 Million Turnover: Simpler BAS to Full BAS

Once your GST turnover reaches $10 million, you’re no longer eligible for Simpler BAS reporting. You’ll need to move to full BAS reporting and adopt a non-cash (accrual) accounting method for GST purposes. This means more detailed reporting on your Business Activity Statement — not just the GST you owe, but a fuller breakdown of your sales and purchases.

$20 Million Turnover: Quarterly to Monthly Lodgment

Cross $20 million in turnover, and your BAS lodgment frequency shifts from quarterly to monthly. This is a bigger operational change than it sounds — it means your bookkeeping, reconciliation, and lodgment processes all need to run on a tighter monthly cycle instead of a quarterly one.

Why This Catches Businesses Out

These changes aren’t optional and they aren’t something you elect into — they apply automatically once you cross the threshold. The ATO has specifically noted that some businesses fail to update their reporting method after crossing these lines, and it’s now contacting businesses directly when this happens. That’s not a conversation you want to have reactively.

Two changes landed on 1 July 2026 that directly affect how much tax most individual taxpayers pay — and how much paperwork you need to deal with come tax time. If you’re an employee or sole trader, both are worth understanding before you lodge your next return.

Change 1: The Lowest Tax Rate Has Dropped

The tax rate on income between $18,201 and $45,000 has reduced from 16% to 15%. It’s a modest change on paper, but it applies to a huge slice of the working population — anyone earning above the tax-free threshold feels it in every pay cycle, not just at tax time.

For most PAYG employees, this adjustment is already reflected in updated withholding rates, so you shouldn’t need to do anything actively — but it’s worth checking your payslip or payroll software to confirm the new rate has been applied correctly.

Change 2: The New $1,000 Instant Deduction

This is the bigger practical shift for a lot of taxpayers. From the 2026–27 income year, individuals can choose a flat $1,000 deduction for work-related expenses instead of collecting and itemising receipts.

Here’s what that means in practice:

• Standard deduction is simpler. If your real work-related expenses are under $1,000, taking the standard deduction is the simpler, and likely better, option — no receipts, no substantiation required.
• Keep records if close to limit. If your expenses are close to or above $1,000 (uniforms, tools, training, home office costs, etc.), it’s worth keeping your records and comparing both methods before you lodge — itemising could still work out ahead.
• It’s one or the other. You can’t do both. It’s one or the other, so the choice is worth a proper comparison rather than a guess.

A Related Change to Watch: Car Expenses

Work-related car expenses remain a major area of ATO focus. For most employees, travel from home to a regular workplace is still considered private travel — even where tolls or parking are involved — and isn’t deductible. If your role genuinely involves additional work-related travel beyond the regular commute, the cents-per-kilometre method can simplify claims, but it’s designed to cover all vehicle-related costs in one rate, so it doesn’t stack with separate claims for fuel, servicing, or depreciation.

From 1 July 2026, the way employers pay superannuation has changed for good. Under the new Payday Super regime, super guarantee contributions must now be paid at the same time as wages — not once a quarter. If you run payroll for even one employee, this is one of the biggest compliance shifts you’ll need to get right this year.

What’s Actually Changing

Previously, employers had until 28 days after the end of each quarter to pay super. That flexibility is gone. Under Payday Super, contributions generally need to reach your employee’s nominated super fund within 7 business days of payday (with some exceptions, such as for new employees).

This means:

• Payroll and cash flow planning need to happen together. Super is no longer a quarterly lump sum you can plan around — it’s a recurring, payday-by-payday obligation.
• Single Touch Payroll (STP) reporting now covers both earnings and super liability. The ATO has real-time visibility into what you owe and when.
• Missing a payment has immediate consequences. If super isn’t received in full and on time, the super guarantee charge applies — and unlike in the past, interest charges related to late or incorrect payments are no longer tax-deductible.

Who Needs to Act Now

Any business with employees — regardless of size — is affected. If you’ve been relying on the ATO’s Small Business Superannuation Clearing House, take note: that service has now closed, so you’ll need a SuperStream-compliant alternative in place.