From 1 July, 2025 businesses will no longer be able to claim tax deductions for General Interest Charges (GIC) and Shortfall Interest Charges (SIC) imposed by the Australian Tax Office (ATO).
This change is set to have a significant impact on businesses with overdue tax debts—particularly small and medium-sized enterprises (SMEs)—making it more important than ever to review your tax planning, cash flow strategies, and compliance processes.
What’s Changing?
Currently, GIC and SIC are tax-deductible for both businesses and individuals. For businesses, this deduction has provided some relief by reducing the cost burden of late tax payments and supporting cash flow management.
However, the government has flagged concerns that this practice may incentivise late payments. By removing the tax deductibility of these interest charges, the goal is to:
- Encourage timely tax compliance
- Reduce the appeal of delaying tax payments
- Ensure fairness in the tax system
Key Date:
From 1 July 2025, GIC and SIC will no longer be deductible for income tax purposes.
What this means for your business:
For many businesses, especially those managing tight cash flows, this change could result in:
- Increased costs for overdue tax obligations
- Reduced flexibility in managing late payments
- Greater pressure on cash flow and tax planning
Without the ability to claim GIC and SIC as deductions, the financial impact of overdue taxes will become more significant.
How to prepare for the Change:
It’s crucial that you act now to avoid placing additional pressure on your business.
1. Stay Ahead of Your Tax Obligations
Minimise your risk of incurring GIC by prioritising timely payments. Review your tax calendar, improve internal processes, and ensure that due dates don’t slip through the cracks.
2. Reassess Your Cash Flow Strategy
If your business currently relies on the deductibility of GIC as part of your financial planning, start phasing that out now. Future-proof your business by creating a strategy that doesn’t depend on these deductions.
3. Engage Early with the ATO
If you’re experiencing financial difficulty, don’t wait. The ATO offers payment plans and support options—but early engagement is key to avoiding penalties and interest.
4. Seek Expert Advice
A tax advisor can help you build a tailored, proactive strategy based on your business’s unique circumstances. The right advice now can save you stress (and money) later.
This change serves as a timely reminder of the importance of good tax planning and compliance. By staying informed about changes to tax legislation and preparing in advance, your business can avoid unnecessary costs, maintain profitability and reduce risk in the new financial environment.
Have questions about how this change might affect your business?
Looking for help with tax planning or ATO negotiations?
We’re here to support you.
If you’re already a client, chances are we’re already talking to you about what to do next. If not, reach out to one of our experienced advisors at hello@matsteer.com.au or 03 9325 6300.
Published May 2025
Damian James, Partner – Specialising in corporate taxation, taxation of complex family groups, financial risk management, and business strategy.
Joseph Seneca, Associate – Specialises in tackling complex tax and structuring issues, and views challenges through an entrepreneurial lens.