Removal of Tax Deductibility for ATO Interest Charges - Sovereign Private

From July 1st 2025, income tax deductions will no longer be allowed for ATO interest charges - General Interest Charge (GIC) and Special Interest Charge (SIC) - regardless of whether they relate to past or future tax liabilities. This change, announced in the 2023–24 MYEFO and now enacted via the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025, repeals relevant deduction provisions in sections 25-1(c) and 25-5(7) of the ITAA 1997 and inserts a new subsection (26-5(1A)) to explicitly deny deductions for GIC/SIC. GIC accrues daily on unpaid tax (currently 11.42%) and SIC arises on income tax shortfalls (currently 7.42%).

Businesses should consider replacing ATO payment plans with bank loans, as bank interest remains deductible. If you have ongoing plans you should reassess arrangements before 1 July 2025 and seek remission of post-July 2025 interest where possible.