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Non deductibility of ATO interest charges for businesses

Businesses can no longer claim income tax deductions for ATO general interest charge (GIC) and shortfall interest charge (SIC) charged on unpaid/underpaid tax liabilities. This change applies to amounts incurred in income years starting on or after 1 July 2025.

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Previously, businesses could deduct ATO-imposed interest charges on overdue tax debts, reducing the net cost of these charges. From 1 July 2025, this deduction is no longer available.

This legislative change is significant for businesses that manage cash flow by deferring tax payments, as the cost of carrying tax debt will effectively increase. Without the tax deduction, the real cost of ATO interest charges rises, making it more expensive to delay tax payments. Currently, the GIC rate is 11.17%.

The removal of tax deductibility for ATO interest charges underscores the importance of timely tax compliance.

 

 

 

 

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