From July 2025:
How Removing Tax-Deductible GIC & SIC Will Hit Aussie Small Businesses
Starting 1 July 2025, small businesses could face significantly higher tax debt costs if proposed changes to the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) pass into law. Here’s what to expect—and how to plan your cash flow accordingly.
Based on the article “Proposed GIC deduction changes: What SMEs and CAs need to know” (published 31 January 2025):
- No more tax deductions for GIC and SIC: From 1 July 2025, the GIC (charged for late tax payment) and the SIC (charged for underpaid tax due to errors) may become nondeductible if legislation passes before the next election.
- Higher cost of tax debt: Without the tax deduction, carrying these charges becomes more expensive—effectively penalizing businesses that use tax debt as short-term financing.
- SMEs will likely turn to accountants: Businesses may seek help to refinance debt via traditional (deductible) loans or request remission from the ATO—though the ATO has tightened criteria and court review may be the only recourse if remission is rejected.
What This Means for Your Small Business
| Impact | What It Means for You |
|---|---|
| Higher effective interest | GIC/SIC will cost more without tax-deductible relief. |
| Cash flow pressures | Need to secure cheaper deductible financing or risk liquidity issues. |
| ATO remission is challenging | You must document and justify compliance and delays thoroughly. |
Your Action Plan
- Review projected tax liabilities before 1 July 2025
Use this time to anticipate potential GIC/SIC charges and plan accordingly. - Speak with your accountant about refinancing strategies
Explore options such as traditional loans where interest is still deductible. - Document payment circumstances diligently
If GIC is incurred, ensure you have strong justification for any remission application. - Track legislation progress
Stay alert to whether the change is confirmed before the federal election—if passed, you’ll need to act faster.
Source: “Proposed GIC deduction changes: What SMEs and CAs need to know”, Acuity (31 January 2025) acuitymag.com