Compliance
Avoiding ATO’s New Deduction Pitfalls: What Every Individual Must Know
Australia has updated rules on certain deductions and withheld refunds—individuals must adjust practices or face audits and delays.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Recent Changes Individuals Should Know About
Several recent legislative changes affect what deductions you can claim and the timing of refunds:
- **No more deductions** for **ATO interest charges** incurred **on or after 1 July 2025**. This means interest charged by ATO when taxes are unpaid won’t be deductible. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/amending-the-tax-law-to-reduce-compliance-cost-for-general-insurers?utm_source=openai))
- **Holding rule for refunds**: From the same date, ATO has discretion to retain certain tax refunds and credits up to **90 days**, especially when valid bank account details are missing. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/your-tax-return/before-you-prepare-your-tax-return/what-s-new-for-individuals?utm_source=openai))
- **Foreign Resident Capital Gains Withholding (FRCGW)** changes: Effective **1 January 2025**, the rate increased to **15%**, threshold removed, applies to all vendors of taxable real property, both individuals and entities; Australian resident vendors need a clearance certificate to avoid withholding. ([ato.gov.au](https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/whats-new-in-the-rental-properties-guide?utm_source=openai))
## Practical Examples to Illustrate the Impacts
- **Deductions**: Person owing ATO $2,000 interest for underpaid tax incurred after 1 July 2025 can’t deduct that interest—no offset.
- **Refunds**: If you’re owed a refund or franking credits, ensure your myGov / ATO has **correct bank account info**—missing details could see your refund withheld or delayed up to three months.
- **Property Sellers / Investors**: Selling Australian real estate? A foreign resident must grapple with withholding at 15%, and for Australian residents, always get **clearance certificate** before settlement to avoid withholding.
## Actionable Steps to Stay Compliant
1. **Review deduction history** and whether any ATO interest will be payable after 1 July 2025—plan to exclude these from your claims.
2. **Update ATO account details** now—ensure financial institution details are current in myGov to prevent delays with refunds.
3. **If selling property**, engage early to obtain clearance certificate or variation notice if applicable.
4. **Track key effective dates**: many changes are already in force (e.g., FRCGW from 1 Jan 2025), so aligning actions accordingly avoids surprises.
Awareness of these rules is essential for individuals. Ensuring your deductions are supported, refunds correctly directed, and property transactions properly cleared keeps you ahead of compliance risks.