Starting 1 July 2025, taxpayers in Australia can no longer claim income tax deductions for interest charges imposed by the ATO, being “GIC” and “SIC”. The incurred interest charges will be non-deductible even if relating to a past liability.
Timing Matters — When Is Interest “Incurred”?
- GIC: Accrues daily on unpaid amounts.
- SIC: Levied when an amended assessment is served.
Interest counts as “incurred” on the exact day it’s charged. So, if it’s triggered before 30 June 2025, it remains deductible—but any amount incurred from 1 July 2025 is non-deductible.
This change increases the after-tax cost of carrying a tax debt, making interest on unpaid tax significantly more expensive. It removes a long-standing cushion taxpayers had when facing ATO interest charges.
To minimise the financial impact, consider planning cash flows carefully, particularly if you expect to incur tax liabilities or rely on payment plans. We recommend seeking professional advice tailored to your circumstances.
Worried about how these ATO changes might impact you? Chat with Julia at Not Just Beans for practical advice on managing tax payments and avoiding costly interest charges.