Treasurer unveils changes to Interest Charges
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January 2024 Newsletter - Treasurer unveils changes to Interest Charges
On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the Government announced it will amend the tax law to deny deductions for ATO interest charges.
From 1 July 2025, it will no longer be possible to tax deduct the interest charged on an overdue debt to the Australian Taxation Office.
The general interest charge (GIC) is incurred when a tax debt has not been paid on time, while the shortfall interest charge (SIC) is levied when a taxpayer incorrectly self-assessed how much they owed the government. Both charges are currently tax deductible.
GIC and SIC have increased in line with rising interest rates and are adjusted quarterly but compound daily. The SIC for January to March next year will be 7.38 per cent and for GIC 11.38 per cent.
As the deductions will be denied, any GIC or SIC that is later remitted will no longer need to be included as assessable income.
The budget document described the removal of tax deductibility as a fairness measure and that it “will enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so”.
The measure will raise $500 million per year once it commences.
