The Australian Taxation Office (ATO) has issued a notice denying deductions for general interest charges (GIC) and shortfall interest charges (SIC) from 1 July 2025 for late or outstanding tax payments, covering income years before and after this date. The non-deductibility of interest charges was introduced by the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, which was enacted on 27 March 2025.
Denying deductions for ATO interest charges
After 1 July 2025, taxpayers can no longer claim an income tax deduction for ATO interest charges.
About this measure
On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it would amend the tax law to deny income tax deductions for ATO interest charges incurred in income years starting on or after 1 July 2025.
This measure is now law.
These amendments deny deductions for ATO interest charges (being the general interest charge (GIC) and the shortfall interest charge (SIC)).
This means that taxpayers can no longer deduct GIC or SIC incurred on or after 1 July 2025.
When are ATO interest charges incurred?
Whether you can claim a deduction will depend on when GIC or SIC is incurred. This is when you become liable for the interest charge. For example:
- GIC imposed on unpaid tax liabilities is incurred on a daily basis.
- SIC imposed on an unpaid income tax shortfall is incurred in the year you are served a notice of amended assessment.
ATO interest charges incurred on or after 1 July 2025
Any GIC or SIC incurred on or after 1 July 2025 is not deductible.
This includes all GIC and SIC in respect of outstanding or late tax payments for income years both before and after 1 July 2025.
As they are not deductible, any GIC or SIC that is later remitted will no longer need to be included as assessable income.
ATO interest charges incurred before 1 July 2025
Any GIC or SIC incurred before 1 July 2025 is not impacted by the changes to the law and will continue to be deductible for the 2024-25 and earlier income years.
If you have (or can) deduct GIC or SIC for the 2024-25 or an earlier income year and it is later remitted, the amount that is remitted will need to be included in your assessable income in the year in which the remission occurred.
