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⚠️ Important Tax Law Change from 1 July 2025: GIC Will No Longer Be Tax Deductible
From 1 July 2025, a significant change to the tax law will affect all taxpayers who incur General Interest Charges (GIC) due to late tax payments. At Mead Partners, we want to ensure our clients understand how this change may impact their finances.
🧾 What Is Changing?
Currently, if you incur GIC due to late or underpaid tax obligations, that interest is tax deductible for all types of taxpayers.
However, under the Treasury Laws Amendment Act 2025, any GIC incurred on or after 1 July 2025 are no longer tax deductible—even if the related debt stems from an earlier income year.
This means:
- Any assessments of GIC that happen after 1 July 2025, or
- Any daily GIC accrued after that date → will not be deductible, regardless of when the debt originally occurred or the tax return was lodged.
- Shortfall Interest Charge (SIC) is applied when there’s a shortfall in tax payments due to underreporting or errors.
👥 Who Will Be Affected?
This change affects all taxpayers, but it will particularly impact:
- Small business owners with current or ongoing tax debts
- Those with ongoing tax disputes or litigation
- Taxpayers who are likely to miss payment deadlines and accrue GIC
- Individuals or businesses relying on the deductibility of GIC as part of their tax strategy
❓ Why Is the Law Changing?
The Australian government’s goal is to:
- Increase accountability for late tax payments
- Discourage reliance on GIC as a “cost of delay”
- Ensure taxpayers seek alternative financing where possible, which may remain deductible depending on the loan’s purpose
✅ What Action Should You Take?
If you currently have outstanding tax debt—or anticipate lodging returns that may result in a payable amount—now is the time to act.
Here’s what we recommend:
- Review any current tax debts and determine if they can be paid off before.
- Consider alternative financing options to clear tax debt. If structured correctly, interest on these loans may still be deductible.
- If you’re involved in tax disputes, speak with us about potential settlement strategies before the new rules apply.
- Contact your Mead Partners advisor to discuss your position and strategy before the deductibility window closes.
If you’re unsure how this affects you, we strongly encourage you to get in touch as soon as possible.
More information is available on the ATO website.
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