The Australian government has recently announced that starting from July 1, 2025, the general interest charge (GIC) and shortfall interest charge (SIC) will no longer be deductible.
The move to expedite tax debt recovery efforts has been undertaken due to the fact that there is currently over $50 billion in collectable tax debt outstanding. This debt is predominantly owed by small businesses.
The aim of this move is to recover the outstanding tax debt at a faster pace, which will help to improve the overall financial health of the country and ensure that businesses are fulfilling their tax obligations.
By streamlining the tax debt recovery process, the government hopes to make it easier for businesses to clear their outstanding debts and avoid any further penalties or legal action.
Currently, GIC and SIC are deductible, which allows businesses to reduce the cost of their tax debt. However, once the change is enacted, businesses will no longer be able to deduct GIC and SIC.
This means that businesses may experience an increase in the cost of their tax debt, which could have a significant impact on their operations and financials.
Here are the key takeaways for businesses to be aware of
- Currently, GIC and SIC are deductible.
- GIC and SIC will become non-deductible from July 1, 2025.
- This change could increase the cost of tax debt for businesses.
- Businesses need to be prepared for heightened financial scrutiny from the ATO.
- Traditional financial institutions may emerge as more appealing financing options due to their deductible interest charges.
To explore cash flow management, financial analysis, and potential business turnaround strategies, don’t hesitate to reach out to your accountant or get in touch with your Ledge Finance Executive on (08) 6318 2777 or secure@ledge.com.au.
Learn more about the change and potential impact on your business.
