From 1 July 2024 GIC/SIC is no longer tax deductible
The ATO imposes an interest charge on:
> late payments of taxes and penalties
> the amount of any increase in your tax liability as a result of an amendment to your assessment, and
> the amount of any increase in other tax liabilities, such as GST or PAYG amounts.
In which year can the GIC/SIC be claimed?
If the GIC/SIC relates to a business still using the STS accounting method, the interest charge imposed can only be claimed as a tax deduction in the year in which it is paid.
If the GIC/SIC does not relate to a business still using the STS accounting method, the interest charge imposed can be claimed as a tax deduction in the tax year that it is incurred.
The Meaning of incurred:
Interest charges imposed when an income tax assessment is amended are incurred in the year in which you are charged the interest.
Interest charges in the other situations listed above are generally incurred in the year in which the interest accrues.
This means that if the accrual relates to a prior tax year (referred to as the effective date), it will be necessary to amend the prior year’s tax return to claim the GIC/SIC deduction. This typically happens if a taxpayer lodges late and after 30 June in the subsequent year.
If that in turn causes the prior year’s income tax liability to be amended, then a further adjustment to the GIC/SIC may be made by the ATO. The adjustment resulting from the amended assessment should be claimed in the year in which it is charged and not backdated to a prior year.
Practical Issues
Be aware that:
> the ATO Pre-filling reports cannot yet be relied on to record the GIC/SIC accurately
> the ATO Tax Portal’s YTD Interest Summary Report:
1. may not show all of the tax payer’s ATO accounts. Check each of the client’s Running Balance Accounts to ensure that it is included.
2. may not be correct if lodgements are not up to date. Once prior year overdue lodgements are brought up to date, check the ATO Tax Portal’s YTD Interest Summary Report again for prior years and lodge amended tax returns as necessary.
2017 personal tax returns
For individuals the deduction claim is made at Item D10 (Cost of Managing Tax Affairs).
Refunds of GIC/SIC, claimed as a tax deduction in a prior year, should be declared at Item 24 (Other Income - Category 1).
Interest Received on overpayment should be declared at Item 10 (Gross Interest).