by Luke Quinnell
Taxpayers that incur general interest charge (GIC) and shortfall interest charges (SIC) from 1 July 2025 will not be able to claim these expenses as a tax deduction. This means that the costs of not paying your tax debt on time will significantly increase from 1 July 2025.
The current ATO GIC annual rate is 11.17%.
Let’s say for example a company with a tax rate of 25% has a $100,000 tax debt. The GIC will be $11,170, however after a tax deduction is claimed this will reduce the true cost by $2,792.50 down to $8,377.50. From 1 July 2025 the true cost under this scenario would be $11,170.
In October 2024, the ATO announced that they are changing their approach to unpaid tax and super and intend to be firmer.
Overall, we have really felt this new approach from the ATO and they are definitely more strict with debt recovery than they have been in the past. This removal of deductibility appears to be another step down this route of being firm on taxpayers to ensure more tax debts are paid on time.
What Can Be Done?
- Realistically the best option is to pay your tax debts when they fall due. It is best to remain aware of when you have upcoming tax debts and pay them in full by the due date.
- If you borrow money from a bank to repay the tax debt the interest charged on this debt will be tax deductible. Therefore, it may be an option to finance your tax debt through a bank or other financial institution.
If you would like to consider the option of financing your tax debt, we have financial specialists in our finance division who can help.
To find out more, get in touch with us below or call 02 4969 6600.
