From 1 July 2025, taxpayers will no longer be able to claim an income tax deduction for interest charges imposed by the ATO—specifically, Shortfall Interest Charges (SIC) and General Interest Charges (GIC). This change could have significant implications for individuals and businesses, particularly those currently under audit.

Taxpayers engaged in audit activity are encouraged to work collaboratively with the ATO to help resolve matters promptly. A cooperative approach may assist in finalising assessments sooner and potentially reduce the period during which interest continues to accrue.

What You Need to Know:

• SIC is typically incurred in the income year in which the ATO issues a notice of amended assessment due to a tax shortfall.
• GIC is charged daily on any unpaid tax liabilities.

What Can You Do?

Importantly, the loss of deductibility applies only to ATO-imposed interest charges. Interest on regular business loans remains deductible.

If you are managing a substantial tax debt, it may be worth exploring refinancing options. Converting your tax debt into a standard business loan could preserve the deductibility of interest expenses and potentially improve your cash flow position.

Rejected GIC Remission Requests: Next Steps

If a GIC remission request has been declined by the ATO, there are further avenues available. After lodging a formal complaint with the ATO and receiving a reference number, you may escalate the matter to the Taxation Ombudsman (TO). The TO has had some success in overturning previously rejected remission decisions.

If you would like to understand how these changes could affect your business or discuss strategies such as refinancing or remission requests, please don’t hesitate to get in touch. We’re here to support you with practical, proactive solutions.