Is GIC tax-deductible?
No — not where the charge is incurred on or after 1 July 2025. The General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) both lost their deductibility on that date. Interest incurred before 1 July 2025 remains deductible for the 2024–25 and earlier income years.
The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 removed the deduction. (ATO — Denying deductions for ATO interest charges)
Three details decide how it applies to you:
- It's the date the charge is incurred, not paid, that counts. GIC that accrues from 1 July 2025 onward is non-deductible even if the tax debt arose in an earlier year. (ATO media reminder)
- The income year of the underlying debt is irrelevant. A 2021–22 debt still accruing interest today accrues it non-deductibly.
- Interest incurred before 1 July 2025 keeps its deductibility. Only charges from the cut-off date forward are affected.
When is GIC not deductible — and when is it still?
| Charge incurred | Deductible? | Applies to |
|---|---|---|
| Before 1 July 2025 | Yes | 2024–25 and earlier income years |
| On or after 1 July 2025 | **No** | All income years, including older debts |
The test is the date the interest is incurred. A single tax debt can therefore straddle both treatments: the interest that accrued on it up to 30 June 2025 is deductible, and the interest accruing from 1 July 2025 on the same debt is not.
GIC and SIC are not the same charge
They are frequently conflated, and the difference matters if your R&D claim is amended.
| Shortfall Interest Charge (SIC) | General Interest Charge (GIC) | |
|---|---|---|
| Applies to | A tax shortfall identified after an amendment | Unpaid or late-paid tax |
| Rate | Base rate **+ 3 percentage points** | Base rate **+ 7 percentage points** |
| Compounding | Daily | Daily |
| Rate reset | Quarterly | Quarterly |
| Deductible from 1 July 2025 | No | No |
Rates are set by formula against a base bank rate and are reviewed each quarter — check the current figure at ATO — General interest charge rather than relying on a number quoted in an article.
The escalation matters. Where an amended assessment issues, SIC applies to the shortfall at the lower rate. Payment falls due 21 days after the notice of amended assessment. After that, GIC — the higher charge — applies to the unpaid tax and to the unpaid SIC. (ATO — Shortfall interest charge)
What happens if the ATO remits the interest
Remission is still available — the change removed deductibility, not the Commissioner's discretion to remit. But the remission mechanics now differ either side of the cut-off, and this asymmetry is easy to miss:
- Interest incurred on or after 1 July 2025, if later remitted, does not need to be included in assessable income. You never deducted it, so there is nothing to claw back.
- Interest incurred before 1 July 2025 that you deducted (or could deduct) for 2024–25 or earlier and that is later remitted must be included in assessable income in the year the remission occurs.
Remission is assessed case by case, and generally turns on circumstances outside your control, financial hardship, or an ATO administrative error. (ATO — Remission of interest charges; PS LA 2006/8)
Why this matters specifically for R&D claimants
The R&D Tax Incentive is a self-assessed program. You register activities, claim the offset, and the ATO and AusIndustry can review the claim afterwards — sometimes years afterwards. If a review leads to an amendment that reduces your offset, the result is a tax shortfall, and that shortfall carries interest.
Until 30 June 2025, that interest was at least deductible, which partly offset the cost. From 1 July 2025, it isn't. The downside of a claim that doesn't hold up under examination is now larger in after-tax terms.
To put the scale in context, the offset itself is significant:
| R&D entity (by aggregated turnover) | Offset type | Rate |
|---|---|---|
| Under A$20M | Refundable | Company tax rate + 18.5 percentage points (i.e. 43.5% at the 25% base rate) |
| A$20M or more | Non-refundable | Company tax rate + 8.5 or 16.5 percentage points, by R&D intensity |
Source: ATO — Rates of R&D tax incentive offset.
When the benefit is this material, an amendment is material too — and the interest on it is now a pure, non-deductible cost.
Before vs after 1 July 2025
| Before 1 July 2025 | From 1 July 2025 | |
|---|---|---|
| GIC on a tax shortfall | Deductible | Not deductible |
| SIC after an amendment | Deductible | Not deductible |
| What determines treatment | — | Date the charge is incurred |
| Net effect of a disallowed R&D position | Interest cost, partly offset by deduction | Interest cost, no deduction |
The mechanics didn't get more complex. The cost of getting a claim wrong did.
The defensible-documentation response
You can't control whether your claim is selected for review. You can control whether the evidence behind it was created at the time the work happened.
The ATO and AusIndustry have consistently stated that R&D entities should keep contemporaneous records — records made around the time activities are planned and conducted — because they are the strongest evidence under review. That expectation has been tested at the Administrative Appeals Tribunal — since October 2024, the Administrative Review Tribunal — in Tier Toys Limited v FC of T [2014] AATA 156 and Ozone Manufacturing Pty Ltd v FC of T [2013] AATA 420, where absent or insufficient records meant the claimed expenditure could not be substantiated. (ATO — Helping you get R&D claims right; business.gov.au — Assess if your R&D activities are eligible)
Contemporaneous records typically show, for each activity:
- The technical hypothesis or unknown you set out to resolve.
- The experiments run and iterations attempted, dated as they happened.
- The results and how they informed the next step.
- The link between the activity and the expenditure claimed against it.
Documentation assembled retrospectively at claim time is permitted, but it carries less weight precisely when weight matters most — during an examination. The interest-deductibility change is one more reason to close that gap before lodging, not after a query lands.
For what those records need to show in practice, see what "contemporaneous documentation" means for the R&D Tax Incentive. If your R&D is software, the activity-level test is set out in are software development activities eligible.
Dossio is infrastructure for exactly this: capturing R&D evidence in structured, dated, audit-ready form as the work happens, with R&D tax experts providing oversight and governance.