Taxpayers will be restricted from claiming deductions for general interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025, after Parliament passed amendments on Wednesday (26 March).
The Labor Party has previously said the changes will enhance incentives for all entities “to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so” but has raised major concerns among accounting bodies and business advocacy groups, who warn the removal of the deductions could have significant consequences for businesses and the wider economy.
Denying GIC ad SIC deductions is a further push to enpower the ATO who has recently ramped up its debt recovery efforts after a lengthy period of limited action, post Covid.
What is GIC
General interest charge (GIC) is applied to unpaid tax liabilities and is worked out daily on a compounding basis.
When GIC applies
The ATO may apply GIC if an amount of tax or some other liability remains unpaid after the date it should have been paid. This includes where:
- there is a tax shortfall because of an amendment or correction
- an instalment of tax is underestimated
- a return is lodged late.
Why is GIC applied
- encourage timely payment of tax
- ensure taxpayers who pay late don’t have an unfair financial advantage over taxpayers who pay on time
- compensate the community for the cost of late payment.
What are current rates of GIC
| GIC rates for 2024–25 income year | ||
| Quarter | GIC annual rate | GIC daily rate |
| April – June 2025 | 11.17% | 0.03060274% |
| January – March 2025 | 11.42% | 0.03128767% |
| October – December 2024 | 11.38% | 0.03109290% |
| July – September 2024 | 11.36% | 0.03103825% |
Effect of GIC on income tax
You may claim a deduction for GIC in your income tax return for the financial year in which the GIC is incurred. If you claim the deduction and the ATO remit the GIC you’ll need to include the remitted GIC as income in your return for the financial year in which the remission is granted.
Tax Planning Strategies
The most obvious tip is to avoid GIC being charged by paying your personal and/or business taxes on time. In order to prioritise timely payments of tax, implement cash flow forecasting and set aside provisional tax buffers. In addition, you could consider
1. Refinance Tax Liabilities with Cheaper Debt
- If cash is tight, consider using a business line of credit or short-term loan to pay the ATO on time.
- The interest on commercial debt is usually deductible.
- Compare interest rates – if loan interest < GIC and it’s deductible, it’s a better option.
2. ATO Payment Plans – Lock Them Early
- If you foresee issues paying on time, negotiate an ATO payment plan in advance.
- GIC still applies, but some relief may be available through remission requests if you’re proactive.
3. GIC Remission Applications
- The ATO has discretion to remit GIC, especially if:
-
- Delay was outside your control (e.g., illness, software failure),
- You made genuine efforts to comply.
- Strong case presentation = reduced GIC = reduced tax impact.
