The Australian government is cracking down on late tax payments. As announced in the 2023-24 Mid-Year Economic and Fiscal Outlook (MYEFO), starting July 1, 2025, taxpayers will no longer be able to claim deductions for interest charges levied by the Australian Taxation Office (ATO). This change is intended to become law but is still awaiting finalisation.
This new measure applies to two specific types of ATO interest charges:
General Interest Charge (GIC): This applies to overdue tax liabilities.
Shortfall Interest Charge (SIC): This applies if your amended tax return shows you owe more tax.
The implication is that taxpayers will have to shoulder the full burden of these interest charges without any tax deduction. However, there's a positive side. If the ATO remits any portion of these charges in the future, the remitted amount won't be considered taxable income.
In summary, to minimise tax liabilities, ensure your tax payments are made on time to avoid ATO interest charges altogether.