From 1 July 2025, the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) will no longer be tax deductible, following a recent bill passed in parliament.
GIC arises from a tax liability that is paid after the due date, including payment arrangements. SIC arises from an amendment to a tax return resulting in tax payable.
Any GIC or SIC incurred before 1 July 2025 won’t be impacted by the new law. The changes will apply to GIC or SIC incurred from 1 July 2025 onwards, including existing payment arrangements.
The current GIC annual rate is 11.17%, making this non-deductible significantly increases the cost.
Businesses are generally able to claim a deduction for interest incurred in borrowing to fund a tax debt. It may be a good time to consider alternative financing options which may be at a lower rate and, for businesses, tax deductible.
