GIC No Longer Tax Deductible From July 2025
Carrying ATO debt just got more expensive. The General Interest Charge is no longer tax deductible, increasing the effective cost of outstanding tax debt by around 30%.
This Changes the Maths on ATO Debt
If your business is carrying ATO debt and relying on the GIC tax deduction to soften the interest cost, that deduction is gone from 1 July 2025. The effective cost of your ATO debt just increased significantly. Businesses on payment plans should reassess their strategy now.
What Changed on 1 July 2025?
GIC and SIC deductions have been permanently removed
As part of the Treasury Laws Amendment, the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) are no longer tax deductible from 1 July 2025. This applies to all GIC and SIC incurred from that date forward.
GIC deduction removed
Interest charges on late or unpaid ATO debt can no longer offset your taxable income.
SIC deduction removed
Shortfall Interest Charge from amended assessments is also no longer deductible.
Effective cost increase of ~30%
For a business on the 25% tax rate, losing the deduction means paying ~30% more on GIC in real terms.
How Much More Does ATO Debt Cost Now?
Example calculations at ~11% GIC rate and 25% company tax rate.
| ATO Debt | Annual GIC | Old Tax Saving | New Tax Saving | Extra Cost/Year |
|---|---|---|---|---|
| $100,000 | $11,000 | $2,750 | $0 | $2,750 |
| $200,000 | $22,000 | $5,500 | $0 | $5,500 |
| $500,000 | $55,000 | $13,750 | $0 | $13,750 |
These figures assume a 25% company tax rate. For sole traders on higher marginal rates, the lost deduction is even more significant.
Why This Pushes Businesses Toward SBR
When carrying ATO debt becomes unsustainable, reducing the principal is the only way to fix the problem at its root.
Many businesses have been managing ATO debt through payment plans, absorbing the GIC cost because the tax deduction softened the blow. That cushion is now gone. For businesses where the debt is already difficult to service, this change can tip the balance.
Costs Are Rising
GIC still accrues at ~11%, but the after-tax cost is now ~30% higher because you cannot offset it against income.
Payment Plans Strain Harder
Payment plans that were marginally viable now become harder to sustain as the true interest cost increases.
SBR Eliminates the Root Cause
By reducing the principal debt by 60-80%, SBR removes the GIC problem entirely. No debt means no interest.
SBR does not just reduce interest costs. It reduces the debt itself, eliminating the GIC problem at the source.
What Are Your Options Now?
Four paths forward, ranked from most proactive to least.
Pay the debt faster
Accelerate payments to reduce the principal and stop GIC from compounding.
Reduces total interest cost but requires available cash flow.
Negotiate a reduced payment plan
Contact the ATO to renegotiate terms or request hardship provisions.
May lower monthly burden but does not reduce the principal debt.
Consider SBR to eliminate the debt
Small Business Restructuring can reduce total debt by 60-80%, eliminating the GIC problem entirely.
Removes the root cause of GIC accumulation and preserves the business.
Do nothing
Continue carrying the debt under the old approach without adjusting strategy.
Costs compound faster now that the tax deduction is gone. Worst option.
When This Applies
Key dates and transitional provisions you need to know.
| Date | Event | Detail |
|---|---|---|
| 1 July 2025 | GIC and SIC deductions removed | The Treasury Laws Amendment takes effect. GIC and SIC incurred from this date onward are no longer tax deductible. |
| FY2025-26 onwards | Full impact on tax returns | Businesses can no longer claim GIC/SIC as a deduction in their tax returns for charges incurred after 1 July 2025. |
| Transitional provision | Pre-July 2025 GIC remains deductible | GIC and SIC incurred before 1 July 2025 can still be claimed as a deduction. Only charges accruing from the effective date lose deductibility. |
Carrying ATO Debt Is Now More Expensive
If your business has ATO debt, check whether SBR could reduce it before the interest costs become unsustainable.
Check Your Eligibility