Important Changes to GIC / SIC

GIC and SIC Charges No Longer Tax Deductible from FY25

From 1 July 2025, businesses and individuals will no longer be able to claim tax deductions for General Interest Charges (GIC) and Shortfall Interest Charges (SIC) imposed by the ATO. This change was announced as part of the Federal Budget 2023–24 and represents a shift in the tax treatment of interest penalties for late payments and shortfalls.

What Are GIC and SIC?

General Interest Charge (GIC) is applied when a taxpayer fails to pay a tax debt by the due date. It is intended to encourage timely payment and compensate the government for the time value of money.

Shortfall Interest Charge (SIC) is imposed when a taxpayer has a shortfall in their tax assessment due to an underestimation of their liability, often arising from amended assessments.

Under current rules (up to 30 June 2025), both GIC and SIC are tax deductible, meaning taxpayers can claim these charges as a deduction in their tax return, reducing their overall taxable income.

What’s Changing from 1 July 2025?

Starting from financial year 2025–26, deductions for GIC and SIC will be disallowed. This means:

• Any GIC or SIC incurred on or after 1 July 2025 will not be deductible.

• Charges accrued before this date will still be deductible under the previous rules.

Implications for Taxpayers

Taxpayers, particularly businesses with complex tax affairs or regular payment deferrals, should take note of the following:

• Cash Flow Planning: Delays in meeting tax obligations will become more costly without the benefit of deductibility. Accurate forecasting and prompt payment will be more critical than ever.

• Review Payment Strategies: Consider paying off outstanding debts sooner to avoid incurring non-deductible GIC or SIC post 30 June 2025.

• Engage Early: If you foresee difficulties meeting your tax obligations, it’s advisable to engage with the ATO early to arrange a payment plan and potentially minimise charges.

For further information or updates, refer to official ATO guidance or get in contact with us on 3285 2633.