iscoverThe ATO’s guidance on the recent law changes to GIC has fallen short in effectively equipping tax practitioners with the necessary knowledge, according to the professional body.
ATO’s GIC non-deductibility guidance falls short, says IPA
29 July 2025
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9 minute read
The Institute of Public Accountants believes the Tax Office’s guidance, administration and execution of the changes to general interest charge (GIC) and shortfall interest charge (SIC) will not be effective in helping practitioners navigate the law change.
The changes, effective from 1 July, mean GIC and SIC incurred by taxpayers on or after 1 July 2025 would no longer be tax deductible.
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Tony Greco, IPA senior tax adviser, said the guidance on this change was very limited and hadn’t provided tax practitioners with necessary detail.
“There are several nuisances and transitional issues that need to be understood to deal with the practicalities of implementing this law change. The non-deductibility of GIC/SIC impacts all taxpayers, and its implications are far reaching,” he said.
“Tax practitioners can have an impact with mitigating some of the adverse consequences of this law change particularly for clients running businesses.”
To help practitioners tackle the law change, IPA produced a guide to the non-deductibility of GIC and SIC to provide a comprehensive breakdown of the legislative change and its practical implications.
Based on the ATO changes, IPA said the correct identification of when an amount of deductible GIC or SIC was incurred would determine whether the amount was deductible.
The ATO was of the viewpoint that SIC was incurred only upon the issue of an amended assessment, GIC was incurred only upon the issue of an assessment and GIC, which continued to accrue after the assessment was issued, was incurred daily.
“When an outstanding tax debt straddles the 2024-25- and 2025-26-income years, apportionment of ATO interest charged in relation to that debt into deductible and non-deductible components may be required based on these established views,” Greco said.
It was added that taxpayers and their advisers may consider alternative sources of funding to pay overdue tax debts, however, deductibility of interest on such loans was not a given and would depend on the taxpayers’ circumstances.
The IPA flagged under the legislative changes that:
· Non-business individual taxpayers would not be able to claim an interest deduction under s.8-1.
· Individuals carrying on a business may be entitled to a deduction under s.8-1 for interest incurred on money borrowed to meet tax debts related to their business activities.
· Companies carrying on a business for the purpose of gaining or producing assessable income were entitled to a deduction under s.8-1.
· All taxpayers were denied a deduction for the interest under s.25-5 to the extent the money was borrowed to pay income tax, PAYG withholding or PAYG instalments.
· Business taxpayers may continue to deduct the interest under s.25-5 to the extent the money was borrowed to pay other business-related tax debts.
It was also noted by the body that further consideration would apply where a taxpayer chose to use credit card debt or a related party loan to finance the payment of the outstanding tax debt.
According to Greco, the ATO had issued some initial website guidance, yet clarity had been sought concerning a number of technical issues, including the interaction between assessment date and incurred date, self-executing liabilities, deductibility of interest incurred on loans to pay tax debts, payment plans and online services for agents.
Tax practitioners could have an impact with mitigating some of the adverse consequences of this law change, particularly for clients running businesses, Greco said.
“By paying down the ATO debts and seeking alternative financing some taxpayers can effectively manage this law change. There is no point telling clients in 12 months’ time that GIC is no longer deductible and needs to be added back when thereby increasing taxable income.”
“Our strong recommendation to members is that there are alternatives for the client to consider. Be proactive and have discussions with clients.”
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