Working Capital Loan vs Sitting on ATO Debt at Today's GIC Rate (2026)
Working Capital Loan vs ATO Debt 2026 | Switchboard Finance
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Current GIC rate · After tax cost · Refinance or sit
ATO GIC Rate Now: What Tax Debt Costs vs a Working Capital Loan
The general interest charge resets every quarter, compounds daily, and since 1 July 2025 it is no longer deductible. Most comparisons you will find online still run on headline rates, which is the wrong test. This page runs it after tax, and is re-verified against the ATO each quarter.
Quick Answer
The current ATO general interest charge resets each quarter, compounds daily, and is no longer deductible. That last change is what moved the maths, because a deductible working capital loan now beats it at a far higher headline rate than most owners assume.
What is the current ATO GIC rate?
The general interest charge is 11.43% per annum for the July to September 2026 quarter, applied as a daily rate of 0.03131507% compounding on whatever is overdue. Verified against the ATO's general interest charge rates page on 23 August 2026. It changes at the next quarterly reset, so treat any figure older than a quarter as stale.
The rate is not discretionary. Under section 8AAD of the Taxation Administration Act 1953 it is the base interest rate plus an uplift of 7 percentage points, divided by the days in the calendar year to give the daily rate. The base rate is the monthly average yield on 90 day Bank Accepted Bills published by the Reserve Bank, taken from the middle month of the preceding quarter. The ATO generally publishes each new rate about two weeks before the quarter starts.
Two things follow from the daily compounding. The charge grows on itself rather than sitting flat, and it accrues on the balance whether or not you have heard from the ATO. On the files we see, that second point is what catches owners out: nothing arrives in the post, and the balance quietly grows anyway. If a payment arrangement is already in place and has slipped, the defaulted ATO payment plan guide covers what changes.
One disambiguation, because the search results mix them: an Australian GIC is the ATO's general interest charge, not a Canadian Guaranteed Investment Certificate.
Source: ATO general interest charge rates, read 23 August 2026. The tick marks the quarter currently in force. Rates are set by the ATO and move every quarter, so this table is re-verified on a quarterly review cycle rather than left to age.
What does GIC actually cost you after tax?
Because general interest charge incurred on or after 1 July 2025 cannot be deducted, its after tax cost is the full 11.43%, while a deductible facility only costs you what is left after the deduction. The ATO's own general interest charge page puts it plainly: GIC incurred on or after 1 July 2025 cannot be claimed as a deduction. GIC incurred before that date remains deductible in the year it was incurred.
That is the whole differentiator, and it is the comparison almost nobody ranking on this term actually shows. Comparing 11.43% against a loan rate side by side is meaningless once one of them carries a tax shield and the other does not. The table below gives the break even: the headline loan rate that costs you exactly what GIC costs you, by tax position.
How to read it: the middle column is flat at 11.43% because a non deductible charge has no tax shield to reduce it. The right column is 11.43% divided by one minus your tax rate. Company rates of 25% and 30% and the resident individual rates are the ATO published rates for the 2025 to 2026 and 2026 to 2027 income years, with the 2% Medicare levy added to the individual rows. Whether interest on a particular facility is deductible to your entity depends on your circumstances, so confirm that with your registered tax agent before you rely on any row here.
Can you get the general interest charge remitted?
Yes, the ATO can remit GIC, but it is a discretion rather than an entitlement and it is not granted as a matter of course. Remission means the ATO reduces or removes the charge, usually where circumstances beyond your control caused the delay or where remission is otherwise fair and reasonable. You ask for it; the ATO decides.
The realistic prospects changed a little this year. The Tax Ombudsman completed a review of the ATO's management of GIC remission in March 2026, finding that decision making was inconsistent, the guidance unclear and the communication poor enough to produce unfair outcomes. In its response on 2 March 2026 the ATO agreed with all ten recommendations, and set out changes already made: expanded website guidance with worked examples, a dedicated remission application form, a $2,500 cap on remissions that can be approved over the phone, and a specialist review team for anything above that.
The practical read for a business owner is this. A small charge on a one off slip is the kind of thing the phone channel is built for. A five or six figure remission request is a written case that goes to a review team and takes time, and the balance keeps compounding while you wait. That is why we generally treat remission as worth asking for but never as the plan. If enforcement has already started, the ATO garnishee notice guide sets out what happens next, and the charge keeps running throughout.
When does a business loan beat sitting on ATO debt?
Refinancing wins when your facility rate sits below the after tax break even in the table above and the balance is not shrinking fast on its own. The full product lane, what lenders look for and which structures suit a tax balance, sits in the ATO tax debt loans guide. What this page settles is the narrower question of whether the swap is worth making at the current rate.
Refinancing usually wins when
- The balance is stable or growing rather than clearing within a few months
- Your entity has taxable income, so the deduction has real value this year
- You can access a rate below the break even for your tax position
- The debt is close to a disclosure or enforcement trigger
- Trading is sound and the tax balance is a timing problem, not a solvency one
Sitting on GIC may be the lesser evil when
- The balance clears within weeks from known receipts
- Your entity is in a loss year, so the deduction is worth nothing now
- The only rate available sits above your break even
- A complying payment arrangement is already in place and holding
- Borrowing would simply move a solvency problem rather than solve it
From our broking, indicative
What we see across the tax balances we refinance, rather than what a rate table says.
- Clients refinancing an ATO balance in the $80,000 to $250,000 range typically land between 11% and 15% per annum, where that interest is deductible, against a general interest charge of 11.43% that is not. Basis: recent files, as at August 2026.
- On that spread, the after tax crossover favours the facility for most trading companies, which is the point of the break even table above rather than a claim about your file. Basis: recent files, as at August 2026.
- Approvals on a clean file typically run 3 to 7 business days from a complete submission, varying by lender and by how current the tax lodgements are. Basis: recent files, as at August 2026.
Indicative only, based on deals we have placed. Not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application, and whether interest is deductible to your entity depends on your own tax position. Not financial advice.
If the working capital question is broader than the tax balance, the working capital loans guide covers facility types and lender criteria, and working capital is defined in the glossary.
When does the ATO tell credit bureaus about your tax debt?
The ATO can report a business tax debt to credit reporting bureaus only where every criterion is met, starting at $100,000 and more than 90 days overdue. Confirmed against the ATO's disclosure of business tax debts page on 23 August 2026. The notice itself, and what to do when one arrives, is covered in the intent to disclose notice guide.
The pattern worth noticing is that four of the six rows are about engagement rather than money. A complying arrangement, or a live dispute, keeps the debt off your credit file even at scale, which is exactly why a plan that quietly falls over is more expensive than it looks. Disclosure is the point where a tax balance stops being a matter between you and the ATO and starts showing up when you next go to a lender.
The number that matters is not 11.43%, it is what 11.43% costs you after tax. Since 1 July 2025 the general interest charge carries no deduction, so its after tax cost is the full headline rate, while a deductible facility costs you only what survives the deduction. For a company on the 30% rate that puts the break even at a 16.33% loan, well above where most tax balances actually refinance. Remission is worth asking for and never worth planning on, and past $100,000 and 90 days the debt stops being private.
Key takeaway: compare the after tax cost, not the headline rates, and re-check the GIC figure every quarter because it moves every quarter.Frequently Asked Questions
The current ATO GIC rate is 11.43% per annum for the July to September 2026 quarter, applied as a daily rate of 0.03131507% compounding on the unpaid balance. The ATO resets it every quarter and generally publishes the new rate about two weeks before the quarter starts. Verified at ato.gov.au on 23 August 2026, and it changes at the next quarterly reset.
No. General interest charge incurred on or after 1 July 2025 cannot be claimed as a deduction, while GIC incurred before that date remains deductible in the year it was incurred. This is the change that lifted the real cost of carrying an ATO balance, because the charge no longer carries any tax shield. It is also why the comparison against a working capital loan has to be run after tax, not on headline rates.
The GIC rate is the base interest rate plus an uplift of 7 percentage points, divided by the number of days in the calendar year to give the daily rate. The base rate is the monthly average yield on 90 day Bank Accepted Bills published by the Reserve Bank, taken from the middle month of the preceding quarter. The mechanism sits in section 8AAD of the Taxation Administration Act 1953.
No, they are different charges carrying different rates. GIC applies to amounts that are already overdue and runs at 11.43% for the July to September 2026 quarter. The shortfall interest charge applies where an assessment is amended and a shortfall is found, and it carries an uplift of 3 percentage points rather than 7, which puts it at 7.43% for the same quarter.
Yes, the ATO can remit GIC, but remission is discretionary and it is not granted as a matter of course. The Tax Ombudsman reviewed how the ATO handles remission and reported in March 2026 that decision making was inconsistent and the guidance unclear. The ATO agreed to all ten recommendations and has capped phone approved remissions at $2,500, routing larger requests to a dedicated review team.
It often is once tax is accounted for, because GIC is no longer deductible while business loan interest usually is. At 11.43% and non deductible, GIC costs a company on the 30% rate the same as a deductible facility at 16.33% per annum. Whether your loan interest is deductible depends on your own circumstances, so confirm that with your registered tax agent before relying on the comparison.
Yes, but only where a business meets every criterion. The debt must be at least $100,000 and more than 90 days overdue, the business must have an ABN and not be an excluded entity, and it must not be effectively engaging with the ATO. A complying payment plan or an active objection, review or appeal stops disclosure, and the ATO gives 28 days written notice before it reports.
GIC keeps compounding daily on whatever remains overdue, because the charge attaches to the unpaid amount rather than to the plan. A defaulted plan also removes the protection that a complying plan gives you against disclosure to credit reporting bureaus. That combination is why a defaulted plan usually costs a great deal more than the missed instalment itself.
Every quarter. The ATO resets the GIC rate for each of the four quarters of the income year and generally announces the new rate about two weeks before that quarter begins. Across the six quarters to September 2026 the rate moved between 10.61% and 11.43%, so any figure quoted in an article that has not been reviewed this quarter is very likely stale.
It depends on the rate you can access, your tax position, and whether the balance is stable or still growing. The mechanical case is simple enough: a deductible facility priced below your after tax break even beats a non deductible charge compounding daily. The judgement around it is not simple, so work it through with your registered tax agent and a broker before committing.
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