The Australian Taxation Office (ATO) charges interest – called the General Interest Charge (GIC) and a Shortfall Interest Charge (SIC) when tax payments are late. Until now, GIC and SIC have been tax-deductible, meaning you could claim them as a business expense.

From 1 July 2025, this will change: GIC and SIC will no longer be deductible effectively making interest costs as much as 47 percent higher.

Who Will Be Affected?

• Small business owners, sole traders, and companies who occasionally pay tax late.
• Individuals with late tax payments or amended assessments.
• Anyone entering into payment plans with the ATO or with existing payment plans after 30 June 2025.

If you usually pay on time, you won’t be directly impacted — but it’s important to stay informed.

What Should You Do?

• Plan ahead: Make sure you set aside funds for tax obligations and meet deadlines.
• Act early: If you’re struggling to pay, contact the ATO or your advisor early to discuss payment options.
• Consider financing options carefully: Because the ATO’s interest rate is relatively high and no longer deductible, it may be worth discussing alternatives with your advisor . In some cases, borrowing from a bank or another lender to pay your tax debt could result in a lower interest rate, and interest on a business loan may be tax-deductible. Compare the costs – for example, a business loan at 7% deductible interest might be cheaper than owing the ATO 11% non-deductible interest . This isn’t right for everyone, but it’s an option to evaluate with professional advice. It should be noted that if you think you have a reason to get your interest remitted due to a circumstance out of your control, refinancing your ATO debt may leave you worse off.
• Seek advice: Talk to us to plan how this change may affect you, especially if you have existing tax debts.

Final Thought

With GIC no longer deductible from July 2025, paying on time will be more important than ever.

If you think this change could impact you, contact us early — we’re here to help you manage your tax affairs and avoid unnecessary costs.