Will new rules for GIC charges affect your tax?

What are General Interest Charges (GIC) charges?

General Interest Charges are interest charges that accrue on overdue amounts of tax owed to the Australia Taxation Office. They’re closely related to Shortfall Interest Charges (SICs) and treated the same way for tax purposes. SICs are like GICs but apply to tax shortfalls calculated when a taxpayer receives an amended assessment. SICs start accruing 21 days after the ATO issues the amended notice.

How does the government treat them for tax purposes?

Currently, any taxable entity can claim GICs and SICs as a tax deduction on their tax return. However, a federal government economics committee recently examined proposed legislation to change that. The committee found that the deductions were too generous, undermined the charges’ ability to deter late payments and recommended passing the legislation.

The changes will take effect from July 1, this year.

What is going to change?

Put simply, the legislation will stop individuals and companies from claiming GICs and SICs as tax deductions. In other words, taxpayers and businesses won’t be able to deduct them from income to reduce their tax liability.

What should I do about it as a small business owner (or taxpayer)?

The most obvious step you can take is to make sure you pay your tax bills before they fall due. If there are extenuating circumstances, such as illness, the ATO may show leniency and waive the remit the charges. Generally, if you have a valid reason to request a remit waiver and have a good record with the ATO, they will be more inclined to grant it. Ordinarily, the ATO will only consider granting a waiver if all your lodgments are up to date (BAS, other activity statements, tax returns and so on).

You might find additional grounds to claim a tax debt waiver here. If you’re in doubt, contact us for more detailed advice.

John Colley

John Colley is the founder and owner of Boss Intelligence. He started his accounting career in rural NSW before opening up shop in Sydney, giving him unique insight into the needs of both city and regional entrepreneurs. John has always been an early adopter of digital accounting technology and was an advocate for increased use of it in practice long before cloud accounting existed. In part, he did this through industry advocacy devoting 13 years to being an industry representative on CPA Australia’s public practice committee (two of which he served as chairman). John also sat on liaison committees for the corporate regulator, ASIC, and represented practitioners during the formative years of what later became the accounting industry’s peak regional bodies, such as IPA, CA ANZ and CPA Australia.

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