Chartered Accountants Australia and New Zealand (CA ANZ), the Institute of Public Accountants, National Tax and Accountants Association and the SMSF Association have lodged a joint submission to the Senate Standing Committees on Economics regarding the proposed changes in Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 (the Bill) to make the general interest charge (GIC) and shortfall interest charge (SIC) non-deductible.

In our joint submission, we recommend that Schedule 2, which makes SIC and GIC non-deductible, should be removed from the Bill.

The Bill states that the purpose of making GIC and SIC non-deductible is that it increases the cost of tax debt thus, encouraging the likelihood of tax being paid on time and/or increase incentives for all entities to correctly self-assess their tax liabilities.

However, we consider that it is unlikely that increasing the cost of SIC will impact an entity’s ability to correctly self-assess their tax liability. Further, we consider that the current cost of GIC means that many taxpayers already have a strong incentive to pay tax on time. Making SIC and GIC non-deductible will inappropriately increase compliance costs of honest taxpayers and disproportionally impact small businesses. We also consider that there are already a wide range of targeted measures that the Australian Taxation Office can undertake to improve the collection of tax debt which the latest annual report indicates that such measures are beginning to make an impact.

In our joint submission, we outline that:

• The proposals are inconsistent with the policy intent of SIC and GIC
• SIC not an appropriate incentive to assess correctly
• Existing GIC calculation encourages payment of tax
• Applying for remission of SIC and GIC is costly to both taxpayers and the ATO
• Disputing decisions to deny remission is difficult