The ATO has confirmed that **any General Interest Charge (GIC) or Shortfall Interest Charge (SIC) incurred on or after 1 July 2025 is no longer tax-deductible .
Up to 30 June 2025, businesses could at least soften the blow by claiming a deduction. From the 2026 income year onward that safety valve is gone.
Bottom line: every dollar of late-payment interest the ATO charges will now hit your after-tax profit in full.
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Old Rules (pre-1 July 2025) |
New Rules (from 1 July 2025) |
|---|---|
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GIC/SIC deductible at company or marginal rate. |
GIC/SIC not deductible. |
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If the ATO later remitted GIC, the remitted amount had to be declared as assessable income. |
No deduction claimed ⇒ no claw-back on remission . |
With GIC currently running at 11 %+ per annum , the true cost of paying the ATO late has effectively increased by up to 30–45 % (your former tax saving).
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Strategy |
How it Helps |
|---|---|
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Lodge on time – even if you can’t pay. |
Late-lodged returns attract automatic penalties and interest. Lodging preserves your penalty-free window for negotiating terms. |
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Request an interest-free payment plan. |
The ATO still offers interest-free arrangements for small businesses that have been compliant and owe < $50 k – but you must apply early and keep up with instalments. |
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Refinance the tax debt. |
A business overdraft or loan is often 6-9 % p.a. and the interest remains deductible. Paying the ATO in full stops GIC from compounding. |
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Monitor BAS due dates. |
Quarterly BAS returns lodged via a tax agent give an extra month to pay – use that buffer, don’t miss it. |
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Use ATO online services. |
Set up Due-date reminders and Secure Mail alerts so notices aren’t buried in your inbox. |
Scenario: A company owes $100 000 in PAYG and lodges its BAS 60 days late.
GIC (11.17 % p.a.) accrues:
$100 000 × 11.17 % × 60⁄365 ≈ $1 836.
Pre-1 July 2025:
Tax deduction @ 25 % company rate saves $459.
Net cost = $1 377.
Post-1 July 2025:
No deduction. Net cost = $1 836.
Effective increase = 33 %.
GIC is now pure pain. Every extra day costs real, non-deductible dollars.
Cash-flow matters: build ATO obligations into weekly cash-flow forecasts.
Finance smarter: if you can’t pay, a bank loan or overdraft may be cheaper and deductible.
Stay proactive: the earlier you contact the ATO (or your tax adviser), the more options you’ll have.
If you’re juggling tax debts or unsure how the new rules affect your business, contact Linix Accountants. We can:
Negotiate payment plans with the ATO.
Model the true cost of different funding options.
Keep you compliant and out of GIC territory for good.
Avoid the interest trap—act before the ATO starts charging.