From 1 July 2025, the rules around ATO interest charges are changing – and not in a way that benefits your tax return.
If you’ve ever relied on claiming the General Interest Charge (GIC) or Shortfall Interest Charge (SIC) as a tax deduction, that strategy is about to be scrapped. As of the new financial year, these charges will no longer be deductible.
Let’s break down what this means, and – more importantly – how to protect your business from getting caught out.
What are GIC and SIC?
You’ll often see these acronyms on ATO statements, and here’s what they mean:
GIC (General Interest Charge)
This is the ATO’s interest charge for late payment of tax. Whether it’s your income tax, GST, or PAYG obligations, if you don’t pay on time, you’ll be hit with ATO interest charges – currently at a whopping 11.42% (January–March 2025 rate). It accrues daily and compounds, so it can stack up fast.
SIC (Shortfall Interest Charge)
This charge kicks in when you’ve under-reported your tax, often due to incorrect self-assessment. The ATO applies SIC from the due date of the liability until they issue an amended assessment. After that, GIC takes over. The current SIC rate is 7.42%, so still not something you want lingering around.
Key Difference?
GIC = late payment.
SIC = under-reporting and amended tax assessments.
What’s Changing?
Until now, you could claim GIC and SIC as a tax deduction – not ideal, but at least there was a silver lining.
But from 1 July 2025, that’s no longer the case – ATO interest charges are no longer tax deductible.
This change was passed by Parliament on 26 March 2025, and it’s all about levelling the playing field. Those who pay on time aren’t subsidising those who don’t, so it’s now even more important to pay your tax obligations on time and correctly.
If you’re hit with ATO interest charges, the ATO can still remit (waive) them in certain cases – particularly if you can demonstrate that it’s fair and reasonable given the circumstances.
Our Perspective as BAS Agents
We’re sharing this information because, as BAS Agents, we regularly reconcile GIC and SIC amounts in our clients’ integrated client accounts as part of the bookkeeping process. It’s something we see frequently, and it’s often an area that gets overlooked – until the charges start piling up.
That said, this isn’t tax advice. If you need help working out how these changes might affect your overall tax position or whether a remission is appropriate, please speak with your registered tax agent or accountant. They can provide tailored tax strategies that suit your situation.
What Should You Do About It?
The best strategy? Avoid GIC and SIC altogether. Here’s how:
✅ Stay on Top of Your Cash Flow
Make cash flow management a non-negotiable part of your business. You can:
Track income and expenses weekly. A real-time view of your cash flow gives you the power to plan.
Use a cash flow forecasting tool or your accounting software’s built-in features – even a simple Excel spreadsheet will do the job!
✅ Set Aside ATO Money Regularly
Don’t dip into GST, PAYG withholding or superannuation contributions.
Open a separate bank account and move these amounts as soon as money comes in.
Think of it like a “no-touch” tax savings account.
- Or if you think you might be tempted, pay the ATO straight away, so you’re building up a credit and then when the payment is due, you only need to pay the balance – or you might even already be in front!
✅ Automate Where You Can
Use tools to:
Track your BAS and GST obligations,
Monitor your tax position,
Remind you of due dates.
Your accounting software and BAS Agent can often do most of this for you.
✅ Keep Records Clean and Up to Date
You can’t make good decisions based on dodgy data.
Reconcile your accounts weekly.
Store digital copies of your invoices, receipts and reports.
Back up your records regularly.
✅ Work with a BAS or Tax Agent
Whether you’re unsure about how much to put aside or need help with a payment plan, a registered BAS – like us! – or tax agent can guide you. They’ll also help keep you out of trouble in the first place.
Final Thoughts
The loss of this deduction is just one more reason to get proactive with your tax obligations. ATO interest charges are high and can be crippling to your cash flow, and now they’ll hurt even more without the deduction cushion.
If you’re a client of ours, rest assured we’re watching this space and continuing to reconcile any ATO interest charges through your integrated account – you’ll see this as a separate line item in your reports. If you’re not sure how to adjust your systems or habits to get ahead, we’re here to help with that too.
Let’s make sure your tax obligations don’t become tax regrets.
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