GIC is no longer tax deductible: what it means

For years, many businesses treated an ATO debt as a cheap, if uncomfortable, way to fund the business. The interest was annoying but tax deductible, and the ATO was often patient. That calculation has changed.

What changed

For general interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025, businesses can no longer claim a tax deduction. The ATO sets the GIC rate each quarter, and the charge compounds daily on overdue amounts. You can find the current rate on the ATO website; we do not quote it here because it changes.

Why it matters

When GIC was deductible, part of its cost was effectively offset by a lower tax bill. Now the full amount comes out of after-tax profit. In practical terms:

	Before the change	After the change
GIC on overdue tax	Generally deductible	Not deductible (incurred from 1 July 2025)
After-tax cost of the debt	Partly offset	Full cost borne
Long payment plans	Cheaper after tax	More expensive after tax

Quick sense check? Tell us the amount and the purpose. A person will call with an honest read, and your credit file stays exactly as it is.

Who should look again

• Businesses on long ATO payment plans.
• Businesses with large or old overdue balances.
• Owners who have been using the ATO as a source of working capital.

If that is you, it is worth comparing the cost of staying on the plan with other ways to clear the debt.

Your options

1. Pay sooner from cash if the business can do so without starving wages and suppliers.
2. Restructure the plan so the debt is cleared faster, if cash flow allows.
3. Ask about remission of GIC where circumstances justify it, with your accountant’s help.
4. Clear the debt with funding, replacing the ATO debt with a loan on agreed terms. Interest on business borrowing is generally deductible, though your accountant should confirm your position.

Our payment plan vs loan comparison sets these side by side, and ATO debt loans covers unsecured and property-secured funding.

A worked comparison (illustrative)

Two businesses each owe the ATO $120,000. One stays on a three-year payment plan; the other clears the debt with a property-secured loan and repays it over the same period. The total dollar cost of each depends on the GIC rate over those three years and the loan’s pricing, but the deductibility change tilts the comparison: GIC now comes entirely out of after-tax profit, while business loan interest generally remains deductible. The only way to know which is cheaper for you is to compare the real totals with your accountant.

Prevention beats cure

The cheapest tax debt is the one you never carry. Setting aside GST and PAYG weekly in a separate account, keeping bookkeeping current and forecasting each BAS are covered in our guide to BAS quarter cash planning.

Read next

• ATO payment plan vs business loan: ATO payment plan vs business loan to clear a tax debt: costs, interest charges, approval, cash flow impact and when each option makes more sense.
• ATO debt loans: ATO debt loans clear a business tax debt so it stops growing with interest. When a loan beats a payment plan, and how unsecured and secured options compare.
• ATO debt options for small business: Your options for dealing with an ATO debt: payment plans, funding, remission requests and getting lodgements up to date, and how to choose.
• Business loan costs and tax: the basics: General guidance on how business loan interest, fees and repayments are usually treated for tax, and why you should confirm your situation with an accountant.
• BAS bill due and short on cash: Can’t pay your BAS on time? Lodge anyway, then weigh a payment plan, a short loan or a line of credit, and learn how to avoid the next squeeze.

Words worth knowing

• Line of credit: an approved limit the business can draw, repay and draw again, usually paying interest only on the drawn balance.
• Working capital: the cash a business needs to keep running while money is tied up in stock and unpaid invoices.
• BAS: the business activity statement used to report and pay GST, PAYG withholding and other amounts to the ATO.
• General interest charge: the ATO’s interest on overdue tax, set quarterly and compounding daily; not deductible when incurred from 1 July 2025.

Check these before you commit

• What will this cost in total, not just per week?
• Are there establishment, line or exit fees?
• Can the term be extended if a sale or refinance is delayed?
• Which assets or properties are being used as security?
• How quickly can the facility be closed if I no longer need it?

Where your accountant fits in

Funding decisions often have tax, legal or family consequences. Talk to your accountant about how repayments, interest and any asset purchases will be treated, and to a lawyer if property, guarantees or a change of structure are involved. Getting advice before you sign is far cheaper than unwinding a decision afterwards, and it usually makes the application stronger too.

The short version

• GIC and SIC incurred from 1 July 2025 are not deductible
• The after-tax cost of tax debts has risen
• GIC is set quarterly and compounds daily
• Compare plans with faster ways to clear the debt

How Capital At Call handles it

You send a 60-second enquiry with the amount, the purpose and a few facts about the business. A real person reads it, usually the same business day, and calls to fill in the gaps. For unsecured options they will ask for recent business bank statements, which can normally be shared through a secure read-only link. For property-secured options they will ask about the property and what is owed on it, with no valuation needed. You then see the offer in plain terms, including the total cost, and decide whether to go ahead. A credit check happens only at that point. If something about your situation is unusual, say so early; it is far easier to plan around a known issue than a surprise.

When borrowing helps, and when it does not

Not every cash problem is a funding problem. Sometimes the better fix is a conversation with a supplier, a payment plan with the ATO, chasing an overdue invoice or adjusting prices. Funding earns its place when it solves a timing gap or unlocks an opportunity worth more than its cost. We will tell you honestly which situation you are in.

Paperwork worth gathering

You do not need a folder of financial statements to start an enquiry. For most unsecured and property-secured funding, these few items cover the essentials:

• Photo ID for each director or owner.
• Access to your business bank account for a secure statement link.
• Your latest BAS, if it is handy.
• Details of existing finance, including any daily or weekly repayments.
• For property-secured funding, the property address and current loan balance.

Getting the enquiry right

Late surprises are what slow funding down. A second property owner nobody mentioned, turnover that is lower in the statements than on the form, an amount that doubles after the first call: each one sends the assessment back to the start. If you tell us the full story at the beginning, even the awkward parts, the file only has to be worked through once.

Talk to a real person

Ready when you are. Send your enquiry and a real person will review it and call you back. There is no credit check to enquire and no selling of your details. The only thing we ask is accuracy: tell us what you really need, what the business really turns over and how your credit really looks, so the first match is the right match.