The ATO has accumulated more than $50 billion in unpaid tax debts which has promoted the Federal Government to make a significant policy response. To address this issue, a legislative change aimed at incentivising more timely debt repayments has been introduced.

Under the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024, which has now passed Parliament, the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) will no longer be tax-deductible expenses. This change is scheduled to take effect from 1 July 2025.

Historically, businesses were permitted to claim GIC and SIC as tax deductions, effectively softening the financial impact of late tax payments. The government’s rationale for removing this deductibility is to strengthen the deterrent value of these charges and encourage more responsible financial behaviour, particularly in the timely payment of tax liabilities.

Importantly, the legislation provides for Commissioner discretion in cases where businesses are adversely affected by natural disasters, illness, or financial hardship in hopes to mitigate concerns that the reform may disproportionately penalise vulnerable taxpayers.

If you’d like to understand how these changes may affect your business, or explore strategies to manage tax obligations effectively, get in touch with Hall Chadwick’s Corporate Tax team today.