Coalition slams GIC deduction changes as ‘brazen cash grab’
The Coalition has promised to urgently review the proposed changes to general interest charge deductions if they are legislated before the election.
Shadow assistant Treasurer Luke Howarth has criticized the government’s move to push ahead with measures to deny deductions for the general interest charge (GIC) and shortfall interest charge (SIC), labelling them as “punitive”.
Speaking in Parliament on Wednesday, Howarth said the existing design of the general interest charge and shortfall interest charge is already effective in putting a taxpayer who is late paying tax in the same position who has paid tax on time.
Howarth said making these interest charges non-deductible, however, went beyond neutralizing this loan benefit.
“The interest charges are already calculated using an uplift to the 90-day bank bill rate. This uplift is seven per cent plus for the GIC, and this is to discourage the use of tax debts as a source of finance,” he said.
“Denying deductibility to every small business across Australia goes well beyond discouraging. It's punitive. It is a penalty.”
Howarth said the government had also failed to listen to stakeholders during the consultation process by rejecting all alternative policies put forward by groups such as the professional accounting bodies.
The Tax Institute in its submission said that if the measure was to proceed, then the uplift rates for GIC and SIC should be reduced.
It also suggested limiting the non-deductibility of GIC and SIC to the relevant uplift component as another alternative to the proposed policy.
Professional bodies also called for more targeted measures that focus on high-debt accounts, rather than penalising all small- and family businesses.
While the explanatory memorandum for the bill points to the ability for a taxpayer to apply for remission of an interest charge, Howarth said this is likely to be costly and complicated in practice.
Howarth also warned that while the explanatory memorandum, the government points to the ability for a taxpayer to apply for remission of an interest charge.
