Different borrowing structures can hide different total costs.

A hypothetical example — not an offer

Assume a $100,000 debt repaid over 24 months. With an illustrative 10% GIC rate held constant, equal monthly principal reductions and interest paid separately, estimated interest is approximately $10,500. Actual rates and ATO payment allocations can differ.

A monthly amortising loan at an illustrative 12% rate would require about $4,707 each month. Interest is approximately $12,976; adding $2,000 in upfront fees brings the total finance cost to approximately $14,976. These are invented comparison inputs, not current rates or lender terms.

Use the calculator with your actual quote and relevant GIC rate. Cost is only one factor: security, personal guarantees, term and default consequences also matter.

GIC is interest on certain unpaid tax liabilities

The Australian Taxation Office applies the general interest charge to certain unpaid tax amounts. It is generally calculated daily on the unpaid amount and compounds daily. The published annual rate changes each quarter.

A payment plan does not generally stop GIC from accruing on an unpaid balance. Paying down the principal can reduce the balance on which future interest is calculated. Check your ATO statement and the official rate for the relevant period.

An estimate is a starting point, not your actual ATO balance

A simple calculator cannot account for every adjustment, tax type, payment date or remission decision. Your actual statement remains the source of truth. Our calculator lets you enter a rate rather than assuming an unverified current rate.

If comparing with finance, include establishment fees, broker fees, repayment timing and the loan term. A lower monthly repayment can conceal a higher total cost. Ask your accountant about tax treatment and whether remission may be available in your circumstances.

Changing one assumption can change the result

A different fee, term or payment date can reverse a cost comparison. If upfront fees are financed rather than paid separately, the loan principal and interest can change too. Record that assumption before comparing totals.

The example above excludes tax effects and assumes a constant illustrative rate. Run the numbers with the written quote and ask your accountant to check the tax position before using the example to choose a facility.

Why a repayment amount alone does not tell you the cost

It is tempting to compare GIC and a business loan by looking at the monthly figure each option produces. That comparison is incomplete. GIC compounds daily on a reducing or growing balance depending on whether you are paying it down, while a loan typically has a fixed amortisation schedule with its own interest rate, establishment fee and possibly ongoing fees. Two numbers that look similar side by side can represent very different total costs once the full term is considered.

A proper comparison needs the same starting balance, the same term, the actual GIC rate for the relevant quarter, and the lender’s full fee schedule — not just the headline rate. Ask for this in writing before deciding, from both the ATO (for the GIC position) and the lender (for the loan quote).

What the loan side of the comparison needs to include

A loan quote that only shows an interest rate is not a complete picture. Establishment fees, ongoing account fees, broker fees where applicable, and the consequences of early repayment or default all affect the real cost. Secured loans may require a mortgage or other security over an asset; unsecured loans can still require a personal guarantee. These are not pricing details — they are risk differences that matter as much as the headline rate.

It is also worth asking how quickly funds would be available, since paying out the ATO sooner can reduce the GIC that would otherwise keep accruing while an application is processed. Timing differences between a loan settlement and when the ATO balance is actually cleared can change the comparison meaningfully.

A hypothetical comparison — illustrative figures only, not current rates

None of the figures below are current ATO rates or loan offers. They exist only to demonstrate the method. Assume a $100,000 ATO debt, repaid over 24 months, with a hypothetical GIC rate of 10% per annum applied on a reducing balance basis with roughly even principal reductions. Using those assumptions, total GIC over the 24 months would be in the order of $10,500.

Now assume a business loan for the same $100,000 over the same 24-month term, at a hypothetical rate of 12% per annum, fully amortising. The approximate monthly repayment would be around $4,707, with total interest of roughly $12,976. Adding a hypothetical $2,000 establishment fee brings the total finance cost to approximately $14,976 — higher than the GIC-only estimate in this particular hypothetical. In a different scenario, with a different GIC rate, a longer ATO timeframe, or added penalties and recovery risk, the loan could come out cheaper instead. The outcome depends entirely on the real inputs for your situation.

What the maths cannot tell you

Cost is only one part of the decision. An ATO debt left unpaid can lead to recovery action, director penalty exposure for unpaid PAYG withholding, GST or super guarantee charge, and reputational or credit reporting consequences in some circumstances. A loan converts a tax debt into a commercial debt with its own repayment obligations, but it can also remove the uncertainty of ongoing ATO recovery activity and let you negotiate a single, predictable repayment.

Equally, taking on a loan you cannot comfortably service just to stop GIC accruing can create a worse problem than the one you started with. The lowest-cost option on paper is not automatically the right one for a business under cash-flow pressure.

Checklist for making your own comparison

• Confirm the actual current ATO GIC rate for your relevant quarter(s), not a rate from an article or old notice.
• Get a written loan quote showing interest rate, all fees and the full repayment schedule.
• Use the same starting balance and the same term for both sides of the comparison.
• Check whether GIC on your debt (incurred from 1 July 2025) is non-deductible, and ask your accountant about the loan’s tax treatment.
• Factor in security, personal guarantees and early repayment conditions, not just the rate.

Common mistakes in this comparison

A common error is comparing a loan’s advertised rate to an outdated or assumed GIC rate rather than the actual current published figure. Another is ignoring fees on the loan side while assuming GIC is the "only" cost of the ATO option, when failure-to-lodge penalties and new liabilities may also be accruing on the ATO account.

A third mistake is assuming the comparison is only about money. Some businesses correctly choose the higher-cost option because it removes legal and operational risk — for example, stopping active ATO recovery action or resolving a director penalty notice timeline — and that trade-off is legitimate, provided it is made with full information.

Questions owners ask

Is a business loan always cheaper than letting GIC accrue? No. It depends on the actual GIC rate, the loan rate and fees, and how long the debt would otherwise remain outstanding. Some scenarios favour a loan; others favour a structured ATO payment plan.

Can I include penalties in this comparison? Yes, if they are part of the ATO balance you are trying to clear — ask your accountant for a full breakdown of GIC, SIC and any failure-to-lodge penalty components before comparing.

Does refinancing an existing payment plan change the comparison? It can, because a new facility may have a different term, rate and fee structure to the original plan — treat it as a fresh comparison rather than assuming the original numbers still apply.

Should I get this analysis done professionally? Yes — your accountant can model the actual numbers using the correct ATO rate and your real balance, which this general comparison cannot replace.

Getting your accountant involved in the comparison properly

A genuinely useful GIC-versus-loan comparison usually needs your accountant’s input, not just a calculator. They can confirm the actual GIC rate applying to your periods, check whether any component of your ATO balance is shortfall interest charge rather than GIC, and model the after-tax position given that GIC incurred from 1 July 2025 is not deductible. They can also sanity-check whether the business can genuinely service a new loan repayment on top of its existing obligations, which a pure interest-rate comparison will not tell you.

Bring your most recent ATO statement of account and any loan quotes you have received to the conversation, along with a short cash-flow summary, so the discussion can focus on the real trade-offs rather than generic numbers.

Industry factors that can tip the comparison

Some industries have cash-flow patterns that make a fixed loan repayment schedule easier to manage than a variable, compounding ATO balance, because a predictable monthly figure is simpler to plan around than a number that keeps moving with the quarterly rate and new liabilities. Other industries with highly seasonal income may prefer to negotiate a payment plan with the ATO that can flex slightly around their trading cycle, if that flexibility is available, rather than lock into a fixed loan repayment during a quiet period.

There is no universal answer by industry — the right choice depends on your specific cash-flow timing, not just the sector you operate in.

What to have ready before requesting a loan quote

• A current ATO statement of account showing the exact balance and liability types.
• Recent financial statements or at least management accounts showing cash flow.
• Details of any existing finance or security already in place over business assets.
• A clear figure for the amount you actually need to clear the ATO balance.
• An understanding of whether you would consider secured or unsecured finance, or both.

A general roadmap for making the decision

In the short term, get the real numbers: the current ATO balance and rate, and at least one written loan quote with full fees disclosed. In the medium term, run the comparison with your accountant on a like-for-like basis, including the non-deductibility of GIC from 1 July 2025, and decide which option your cash flow can actually sustain over the full term, not just in the first month.

In the longer term, whichever option you choose, monitor it against your original expectations — is the ATO balance clearing as planned, or is the loan repayment under more strain than expected — and go back to your accountant promptly if the plan is not tracking the way you modelled it.

Why dates and payment allocation change the result

Two businesses with the same opening debt can incur different interest if they pay on different dates. Daily compounding means the unpaid balance matters each day, not just at month end. A rate change between quarters also changes the calculation. An annual rate multiplied by the opening debt is therefore only a rough guide, not a reconstruction of an ATO account.

Gather the statement periods, payment dates, credits and adjustments before trying to reconcile the balance. If a calculator assumes equal principal reductions, check whether the actual arrangement follows that pattern. Ask your accountant about discrepancies instead of treating a simplified estimate as an amount the ATO must accept.

The tax treatment changed from 1 July 2025

The ATO states that GIC and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible. The date the interest is incurred matters, including where the underlying tax liability relates to an earlier year. Do not reuse a historic comparison that assumes all ATO interest reduces taxable income.

That change does not mean every alternative loan is deductible, or that finance automatically saves money. The use of the funds and your circumstances affect the treatment of loan interest and fees. Have your accountant check the tax assumptions separately from the lender quote; this website’s calculator excludes tax effects.

Make a like-for-like cost comparison

Use the same debt, a realistic payment timeline and every compulsory fee. Record whether a loan rate is fixed or variable and whether quoted costs include establishment, ongoing, legal or valuation charges. Include early payout conditions if you expect to repay sooner. A lower repayment is not the same as lower interest or lower total cost.

Consider non-price risks too. A secured loan may expose property; an unsecured facility can still carry guarantees and business asset security. If requesting interest remission, do not deduct hoped-for relief from the debt until the ATO has confirmed it. Borrowing should be evaluated against the actual liability and a sustainable operating forecast.