GIC is 11.51% for Oct–Dec 2026 and no longer tax deductible. Payment plans, director penalty notices, late lodgement penalties and practical steps.
Owing the ATO has always been costly. Since 1 July 2025 it costs more, because the interest the ATO charges on late tax can no longer be claimed as a tax deduction. If your business is carrying a tax debt, or might be soon, here is what you need to know and what to do about it.
The general interest charge (GIC) applies when a tax debt isn't paid by its due date. It is calculated daily and compounds daily, so the balance grows faster the longer you leave it.
The rate is set by formula under section 8AAD of the Taxation Administration Act 1953. It is the "base interest rate", which is the monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank, plus 7 percentage points. The ATO updates the rate every quarter.
For the October to December 2026 quarter the ATO has published a GIC rate of 11.51% a year (0.03153425% a day). The shortfall interest charge (SIC), which applies when an amended assessment increases your tax, is 7.51% a year for the same quarter. Rates change every quarter, so check the ATO's GIC rates page for the current figure.
Until 30 June 2025, businesses could generally claim GIC and SIC as a tax deduction. The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 ended that. Under the Act, GIC and SIC incurred on or after 1 July 2025 are no longer deductible.
What matters is when the interest is incurred. It doesn't matter when the original debt arose or when you pay. Interest that accrues on an old debt after 1 July 2025 is not deductible.
In practice, an 11.51% rate that once cost a company on the 25% base rate entity tax rate roughly 8.6% after tax now costs the full 11.51%. That is well above what many business loans and overdrafts charge, and interest on those loans may still be deductible if the money is used in the business.
If you can't pay in full, a payment plan is usually the first step. According to the ATO:
The important catch is that GIC keeps accruing on a payment plan, compounding daily. A plan stops collection action, but it doesn't make the debt interest-free.
Company directors can become personally liable for certain unpaid company debts under Division 269 of Schedule 1 to the Taxation Administration Act 1953. The debts covered are PAYG withholding, GST and the superannuation guarantee charge (SGC). GST has been included for tax periods from 1 April 2020.
The ATO recovers the penalty by issuing a director penalty notice (DPN). A standard DPN can be remitted if, within 21 days of the notice, the company pays the debt or appoints an administrator, a small business restructuring practitioner or a liquidator.
The "lockdown" rule is where it gets serious. If PAYG withholding or GST stays unpaid and was not reported to the ATO within three months of its due date, or if SGC is unpaid and was not reported by the SGC statement due date, putting the company into administration or liquidation will not remit the penalty. In that case only paying the debt clears it.
The lesson is simple. Lodge your BAS and SGC statements on time, even if the company can't pay.
Late lodgement can attract a failure to lodge (FTL) penalty under Subdivision 286-C of Schedule 1 to the Taxation Administration Act 1953. For a small entity, the base penalty is one penalty unit for each 28-day period, or part of one, that the document is late, up to a maximum of five penalty units. The penalty is doubled for medium entities and multiplied by five for large entities.
The Commonwealth penalty unit rose to $364 from 1 July 2026 under the Crimes (Amount of a Penalty Unit) Instrument 2026, up from $330. So a small business that lodges a BAS three months late faces up to $1,456, and the maximum for a single document is $1,820. That comes on top of any GIC on the unpaid amount.
Generally yes. The new rule applies to GIC and SIC incurred on or after 1 July 2025. Interest incurred before that date stays deductible under the old rules.
No. GIC continues to accrue and compound daily on the outstanding balance while you are on a plan.
No. It is reset each quarter at the 90-day Bank Accepted Bill yield plus 7 percentage points. For October to December 2026 it is 11.51% a year.
Report PAYG withholding and GST on time, within three months of the due date at the latest, and lodge SGC statements by their due date. That keeps your options open if the company can't pay.
This article is general information only and does not take your personal circumstances into account. Talk to us before acting on it.
Want help with this? Get in touch. We are based on the Sunshine Coast, regularly in Geelong, and work with clients online across Australia. See our 2026 prices.
