It’s crucial to be aware of significant changes affecting businesses with outstanding tax debts. 

Effective from 1 July 2025, the Australian Taxation Office (ATO) will no longer allow the deductibility of General Interest Charges (GIC) incurred on or after this date. 

What This Means for Your Business

Previously, businesses could claim a tax deduction for GIC applied to overdue tax liabilities. From 1 July 2025, any GIC incurred—currently at an annual rate of 11.17%, compounded daily—will not be tax-deductible. This change increases the real cost of carrying tax debt, as the interest will now be a non-deductible expense.

Action Steps to Consider

• Settle Outstanding Debts Promptly: If your business has overdue tax liabilities, these need to have been paid before 30 June 2025 to ensure any associated GIC remains deductible.
  
• Establish Payment Plans: If immediate full payment isn’t feasible, consider setting up a payment plan with the ATO. While GIC will still accrue, a structured plan can help manage cash flow.
  
• Explore Alternative Financing: Consult with financial advisors about refinancing options. Interest on business loans used to pay tax debts may still be deductible, potentially offering a more favourable financial outcome.
  
• Seek Professional Advice: Consult with your accountant or tax advisor to discuss your specific situation and develop a tailored strategy that aligns with your business’s financial goals.

If you have any questions or would like additional information, speak with your licensed tax or business adviser – we’re here to help.