Scrapping Deductions for GIC and SIC

From 1st July 2025, taxpayers will no longer be able to deduct the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) on their tax returns. This change, passed by Parliament on 26th March, means taxpayers will need to reconsider how they manage tax debts.

Under the new rules, the Commissioner can still remit interest charges in cases where it is fair and reasonable, taking into account the circumstances surrounding delayed tax payments or shortfalls.

This change is designed to create a more level playing field for those who already meet their obligations.

What are GIC and SIC?

• GIC (General Interest Charge):
  The GIC is imposed on unpaid tax liabilities when taxpayers fail to pay their tax on time. The GIC rate for the January-March 2025 quarter is 11.42%. The charge accrues daily on a compounding basis until the overdue amount is paid. It applies to late payments of taxes such as income tax, GST, or other tax obligations.
• SIC (Shortfall Interest Charge):
  The SIC applies to tax shortfalls due to incorrect self-assessment. It applies from the due date of the tax liability until the Commissioner issues an amended assessment. Once the assessment is amended, the GIC applies. The SIC is calculated at a lower rate than the GIC, currently 7.42% for the January-March 2025 quarter.

The key difference between the two is that GIC applies to late tax payments. In contrast, SIC applies when an assessment is amended, resulting in an increased liability due to incorrect self-assessment.

Reconsider How You Manage Tax Debt

The ATO advise that good cash flow habits can help your business stay on top of tax obligations and avoid falling into debt. They recommend the use of digital tools that suit your business to automate tasks like GST reporting and tracking your tax position. Make it a habit to set aside GST, PAYG withholding and super contributions regularly. Having a separate bank account for these can make it easier. Plan ahead by tracking what money is coming in and going out so you’re ready for upcoming expenses. Keep your business records accurate and up to date, and back them up regularly. If you’re unsure about anything, a registered tax or BAS agent can help you stay on track.

For more information, see: Managing payments | Australian Taxation Office.

What Employers Need to Know

Starting 1st July 2025, the Superannuation Guarantee (SG) rate will increase from 11.5% to 12%. This means employers must contribute a higher percentage of their employees’ wages to superannuation.

Employers should update payroll systems to reflect the new rate and ensure they meet their obligations. Failure to comply could result in penalties, including the Superannuation Guarantee Charge (SGC). It’s important to plan ahead and make necessary adjustments to avoid any issues.

Source: How much super to pay | Australian Taxation Office