A significant change has recently passed through Parliament that could impact your business’ tax obligations.

Let’s break down what this means for you and how to navigate these changes effectively.​

 

what’s changing?

As of 1 July 2025, businesses will no longer be able to claim tax deductions for the General Interest Charge [GIC] and Shortfall Interest Charge [SIC] incurred on overdue tax debts or underpaid tax liabilities. Previously, these charges were deductible, providing some relief to businesses facing financial strains. The removal of this deductibility aims to encourage timely tax payments and accurate self-assessment.

 

understanding GIC and SIC

  • General Interest Charge [GIC]: Applied when tax liabilities aren’t paid by the due date, calculated daily on the outstanding amount.​ Current rate 11.17%
  • Shortfall Interest Charge [SIC]: Imposed when there’s an underpayment due to an incorrect tax return, covering the period from when the tax was originally due until the shortfall is corrected.​ Current rate 7.17%

Both charges accrue daily and can accumulate significantly over time.

 

why the change?

The government anticipates that removing these deductions will enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, leveling the playing field for individuals and businesses who already do so. ​

 

impact on SMEs

For SMEs, this change means that any GIC or SIC incurred from 1 July 2025, will represent a direct, non-deductible expense, increasing the overall cost of late or underpaid taxes. This could place additional financial pressure on businesses already managing tight cash flows.​

 

what can you do?

  1. Prioritise timely tax payments: ensure that your tax liabilities are paid by their due dates to avoid incurring GIC.
  2. Accurate tax reporting: double-check your tax returns for accuracy to prevent underpayments and the associated SIC.
  3. Seek professional advice: engage with your accountant or tax advisor to develop strategies for managing tax obligations effectively.
  4. Communicate with the ATO: if you’re facing financial difficulties, proactively reach out to the ATO to discuss payment plans or possible remissions.
  5.  Engage with your bank, finance broker + other credit providers: if your business is experiencing short term cashflow issues, interest on other forms of credit remains deductible and may have a lower interest rate than the ATO. Speak to your trusted finance advisor for options like short term loans, debtor finance or  review financial facilities generally.

 

While this legislative change introduces new challenges, proactive planning and diligent financial management can help mitigate its impact. Staying informed and seeking professional guidance will be key to navigating this new landscape successfully.​

By staying ahead of these changes, you can ensure your business remains compliant and financially healthy in the years to come.

 

we’re here to help!

If you have any questions or concerns about how these changes will impact your business, give our accounting + tax experts a buzz on 1300 BDEPOT or get in touch via oneplace@businessdepot.com.au.

 

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