If your business has ever dealt with tax debts, you may be familiar with the ATO’s interest charges—Shortfall Interest Charge (SIC) and General Interest Charge (GIC). These charges have always been a financial sting, but from 1 July 2025, they’re about to hurt a little more.

Here’s what’s changing—and what it could mean for you.

💡 What Are SIC and GIC?

Let’s start with a quick refresher:

• Shortfall Interest Charge (SIC) applies when you underpay your tax due to an incorrect self-assessment. It accrues from when the tax should’ve been paid to when an amended assessment is issued.
• General Interest Charge (GIC) kicks in when tax isn’t paid on time. It also applies after a reassessment replaces SIC.

These charges are meant to level the playing field. In short, the ATO doesn’t want to become your lender, especially when other taxpayers are paying on time.

Current interest rates:

• SIC: 7.42% (90-day bank bill rate + 3%)
• GIC: 11.42% (90-day bank bill rate + 7%)

Until now, both interest charges were tax-deductible—a small relief when dealing with big tax bills.

🔄 What’s Changing from 1 July 2025?

The government has announced that SIC and GIC will no longer be tax-deductible from 1 July 2025, under proposed changes in the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024.

This means if you incur these interest charges in the future, you won’t be able to claim them as a tax deduction—making the cost of late or underpaid tax even higher.

📈 Why the Change?

The ATO is currently dealing with over $100 billion in collectable tax debt. While some taxpayers may only occasionally fall behind, others have come to rely on the ATO as a kind of informal lender—with no paperwork and relatively high tolerance for late payments.

The government wants to reverse this trend by making it more expensive to delay payment. In their words, removing the deduction “levels the playing field” for those who do the right thing and pay their taxes on time.

⚖️ Is It Fair?

Not everyone agrees.

Critics argue that removing the deduction effectively turns SIC and GIC into penalties, especially for those who make honest mistakes or face genuine cash flow challenges. There’s already a penalty system in place for serious non-compliance—this change adds another layer of financial pain for everyday businesses and individuals.

🙏 Can You Still Request Remission?

Yes—this is important.

Even after the change takes effect, you’ll still be able to apply for remission of GIC and SIC. The ATO has discretionary power to reduce or waive interest where it’s fair to do so.

For example:

• If a natural disaster delayed your payment.
• If you’ve generally had a good compliance history.
• If there were delays caused by the ATO itself.

You’ll just need to explain your situation and show that you’ve acted responsibly.

And one final note: if interest is remitted, it will no longer be treated as assessable income, because it wasn’t deductible in the first place.

💼 What Should You Do?

Plan ahead. With the loss of deductibility, the real cost of tax debts will increase—especially if you’ve been relying on payment plans or pushing out tax bills as part of your cash flow strategy.

Now is the time to:

• Review your tax planning and payment strategies.
• Improve your recordkeeping and compliance to avoid shortfalls.
• Explore alternative financing options if you’ve been relying on ATO debt as a backup.

Need help navigating the changes?

At NBK Services Pty Ltd, we specialize in proactive bookkeeping and advisory services that help you stay ahead of changes like these. Whether it’s reviewing your current situation to avoid ATO debts and plan for them ahead of time or helping you manage existing ATO debts more strategically hand in hand with your accountant, we’re here to support your financial success.

📩 Get in touch with us today to help prepare for the new rules before they hit.