We would like to bring to your attention recent legislative changes that may affect the deductibility of certain ATO interest charges.
From 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) will no longer be tax-deductible. This change applies to all GIC and SIC amounts, regardless of whether the charges relate to income years before or after 1 July 2025.
What does this mean?
- • Any GIC or SIC incurred on or after 1 July 2025 will not be deductible.
- • As a result, if any portion of these charges is later remitted by the ATO, you will not need to include the remitted amount as assessable income.
What about interest charged before 1 July 2025?
GIC or SIC incurred prior to 1 July 2025 remains deductible, under the existing rules. That means:
- • For the 2024–25 income year or earlier, GIC and SIC can still be claimed as deductions.
- • However, if a deductible amount is later remitted, it must be included in your assessable income in the year the remission occurs.
It is also worth noting that the current GIC rate is 11.17% per annum, and with the removal of deductibility, the effective cost of these charges will increase for affected taxpayers.
Consider Your Financing Strategy
Given these changes, it may be timely to review your approach to managing tax liabilities. Businesses are generally able to claim a deduction for interest incurred on funds borrowed to pay tax debts, which could offer a more cost-effective solution—particularly if the interest rate is lower than the GIC rate.
Be Proactive
Understanding the implications of this change and planning accordingly can help reduce unnecessary costs. If you anticipate exposure to GIC or SIC charges in future income years, it may be beneficial to consider options that help manage or reduce that exposure in a more tax-effective way.
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