As part of our commitment to keeping you informed about important tax developments, we want to highlight a significant proposed change to the deductibility of interest charges applied by the Australian Taxation Office (ATO) on tax liabilities.
What’s Changing?
It is proposed that starting from 1 July 2025, taxpayers will no longer be able to claim tax deductions for General Interest Charges (GIC) and Shortfall Interest Charges (SIC) imposed by the ATO. These charges would be applied to late payments and underpaid tax liabilities. Historically, these interest charges have been tax-deductible, providing some relief to taxpayers when managing their tax debts.
Why the Change?
This proposed legislative amendment, introduced as part of the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 aims to enhance tax compliance by increasing the cost of not paying tax liabilities by the due date.
What Should You Do?
In preparation for the potential implementation of these changes, we recommend considering the following actions:
- Settling Outstanding Tax Debts Before 1 July 2025.
- Reviewing Payment Plans extending past 1 July 2025 and recalculating the expected cost of this debt without the associated interest deduction.
- Forecast future expected tax liabilities to ensure cash flow is available to pay these liabilities as and when they fall due.
If you have any questions or would like to discuss how these proposed changes may impact you if passed, please don’t hesitate to reach out to your Harris Black team member.