No more tax deduction for GIC & SIC

From 1 July 2025, the tax deduction for the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) is no longer allowed.

What are GIC and SIC?

GIC is interest charged by the Australian Taxation Office (ATO) when a tax liability (income tax, GST, PAYG, etc) remains unpaid after its due date.

SIC is interest charged when you’ve under-paid tax (i.e., there’s a shortfall and the ATO issues an amended assessment) and the interest runs from the time the shortfall occurred.

What exactly is changing?

The law has been passed via the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 (previously the Bill).

For income years starting on or after 1 July 2025, interest charges (GIC/SIC) incurred on or after that date will no longer be deductible.

If the GIC/SIC was “incurred” before 1 July 2025, those amounts remain deductible under the old rules. But the timing is tricky: “incurred” means when you become liable for the interest charge or when the assessment/notice is issued, not just when the underlying tax debt arises.

Why does it matter?

Because previously you could claim the GIC/SIC as a deduction, reducing taxable income and thereby reducing the effective cost. With the deduction gone, the full cost hits your bottom line.

It raises the cost of neglecting tax obligations. For smaller businesses or those with cash-flow issues, this could be significant.

What this means for you

1. We’ll be reviewing your recent ATO statements to identify any GIC or SIC amounts incurred since 1 July 2025. These can no longer be claimed as deductions in your 2025–26 return.
2. We’re updating our tax and forecasting processes to ensure GIC and SIC are correctly treated as non-deductible expenses.
3. Our focus will be on prevention: timely lodgement and payment of tax obligations to avoid unnecessary GIC/SIC accruals.
4. If you’re currently on a payment plan, we’ll assess whether it’s more cost-effective to refinance or pay out the balance sooner, since interest is now fully non-deductible.
5. We’ll consider the cash-flow implications of these changes when preparing your forecasts and budgets.

If you’re concerned about your exposure to GIC or SIC, reach out to your Johnsons MME advisor. We can review your current ATO position and help reduce future costs.