No More Tax Deductions for GIC and SIC from 1 July 2025: What You Need to Know

The Australian Government has officially passed legislation that will remove tax deductibility for the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) starting 1 July 2025. Introduced under the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024, this change is designed to encourage timely tax payments by increasing the financial cost of delaying them.

Understanding GIC and SIC

GIC and SIC are interest charges applied by the Australian Taxation Office (ATO) on:

- Outstanding tax debts (GIC)

- Underpaid tax liabilities (SIC)

These charges accrue daily and are calculated using the 90-day bank bill rate plus an uplift factor—currently:

- 7% for GIC

- 3% for SIC

Previously, these charges were tax-deductible, helping to reduce the financial impact on businesses. From 1 July 2025, however, this will no longer be the case—making tax debt more expensive to carry.

Key Implications for Business Owners

Legislation Is Final

There’s no ambiguity—GIC and SIC incurred on or after 1 July 2025 will not be deductible, even if the underlying debt arose before that date.

Higher After-Tax Costs

Removing deductibility increases the real cost of these charges. Given their already high interest rates, this change could feel like a double penalty for businesses managing tax debt.

Impact on Existing Payment Plans

If your business is on an ATO payment plan that extends beyond 1 July 2025, any GIC or SIC accrued after that date won’t be deductible, even if it relates to earlier debts.

Uneven Impact on Small Businesses

Larger businesses can often refinance tax debts at lower rates and still claim interest deductions. Small businesses, however, may have fewer options—leaving them to absorb higher costs without tax relief.

What You Should Do Now

To minimise the impact of these changes, consider the following steps:

- Pay Off Tax Debts Early 

Settle outstanding tax liabilities before 1 July 2025 to retain deductibility on current interest charges.

- Review Your Cash Flow 

Plan for the increased after-tax cost of GIC and SIC. Ensure your business has the liquidity to meet tax obligations on time.

- Strengthen Tax Compliance 

Implement or enhance systems to ensure timely and accurate tax payments—avoiding GIC and SIC altogether.

- Seek Professional Advice 

Reach out ot us to explore refinancing options and develop strategies to reduce exposure before the new rules take effect.