New ATO Rule 2025: GIC and SIC Deductions Denied
- June 3, 2025
- Posted by: Admin
- Categories:
From 1 July 2025, the Australian Taxation Office (ATO) will deny taxdeductions for General Interest Charges (GIC) and Shortfall InterestCharges (SIC). These charges, which apply when a business pays tax late or underpays, will no longer be deductible under the Income Tax Assessment Act 1997, following legislative changes passed in November 2023.
What Are GIC and SIC?
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- GIC (General Interest Charge): Applied when tax debts are paid late.
- SIC (Shortfall Interest Charge): Applied when there’s a shortfall in tax due to amended assessments (e.g. errors or omissions).
Until now, businesses could claim deductions for these interest charges as part of their tax liabilities. However, under the new legislation, these deductions will be completely removed, effective from 1 July 2025.
Why the ATO Is Making This Change
According to the ATO, allowing deductions for penalties like GIC and SIC contradicts the purpose of the interest charges. These are intended to encourage timely compliance. Making them non deductible reinforces that late payment or underpayment should not provide a tax benefit.
This change aligns with a broader government effort to ensure fairness in the tax system and discourage delayed compliance.
Impacts on Your Business
With this change, businesses will feel a direct financial hit for non-compliance.
Key Effects Include
∙ No tax offset for interest charged on overdue or underpaid tax
∙ Higher effective cost of non-compliance
∙ Reduced profitability due to loss of deductibility
∙ Increased pressure on internal tax management and reporting accuracy
What You Should Do Now
With the rule taking effect from 1 July 2025, now is the time to review and improve your tax compliance strategies:
∙ Assess your reporting and lodgement timelines
∙ Strengthen your internal controls and review systems
∙ Submit all returns (BAS, FBT, income tax) on time
∙ Monitor and manage PAYG instalments and tax estimates to avoid shortfalls
Conclusion
The ATO’s denial of GIC and SIC deductions is a significant shift that puts more weight on timely and accurate tax compliance. From 1 July 2025, late or incorrect payments will not only attract penalties but also increase your tax burden with no relief through deductions.
At SVT Advisors, we can help you implement smart processes and systems that ensure your tax compliance is timely, accurate, and stress-free before the costs begin to add up.