ATO INTEREST CHARGES NO LONGER DEDUCTIBLE
From 1 July 2025, two types of interest charges imposed by the Australian Taxation Office (ATO) are no longer deductible.
How does this affect your tax position?
The ATO has scrapped the provision that previously allowed a deduction to be claimed for General Interest Charges (GIC) and Shortfall Interest Charges (SIC).
In simple terms:
· GIC applies when you pay your tax liability late.
· SIC is applied to tax shortfalls (debts) that arise from an amendment or correction of prior year’s tax returns.
If you have an outstanding debt with the ATO, then it is likely that the cost of this debt has increased. The changes apply to all interest incurred from 1 July 2025, even if it relates to a tax debt that arose before this date.
When there is a valid reason for an outstanding debt with the ATO, the request for a remission of interest is still available. In the event of having this request granted, the treatment of the remitted interest will depend on how the original GIC/ SIC was incurred:
· If the GIC/ SIC was incurred before 1 July 2025, and the remission was processed after this date, then the interest remitted (considered interest income) will be included in your assessable income.
· If the GIC/ SIC was incurred after 1 July 2025, then it will not be included in your assessable income.
How can you reduce the impact of these changes?
The best approach here is to pay your outstanding ATO debt as soon as possible, as payment plans that are arranged with the ATO will still accrue GIC.
If this is not an option, then you may want to consider the alternative costs of borrowing from another source.
The team at GPG Business Advisory is here to help. If you would like to review your tax position and discuss the impact of these changes, please feel free to contact us on contact@gpgbusinessadvisory.
