Whilst the RBA and banks have been making headlines with 10 interest rate rises in a row the ATO have quietly been increasing their General Interest & Shortfall Charges.
From 1 April the ATO have increased rates on outstanding debts to:
- General Interest Charge (GIC) 10.46% – applied to late or unpaid tax liabilities including Income Tax, excess shortfalls in Income Tax Instalments varied or estimated incorrectly, GST & PAYG.
- Shortfall Interest Charge (SIC) 6.46% – late lodgement interest incurred from the due date for a return to actual date lodged, and then GIC applies.
Both the SIC and GIC rates are determined by a formula in the Taxation Administration Act 1953 which relies on the 90-day bank bill rate rather than the high-profile RBA cash rate. To calculate the GIC rate, 7 percentage points are added to the average bank bill base rate for a month, which is specified by the act, in the preceding quarter, whilst 3 per cent is added for SIC.
- Our experience over the last few months is that GIC which was being remitted by the ATO has now stopped and interest is being automatically added to any outstanding balance.
- Whilst the ATO are still happy to enter repayment plans for amounts outstanding, they are generally not inclined to remit interest.
- Hence applications for remittance now involve a more formal review of your current financial circumstances.
- Throughout COVID the ATO paused its firmer and stronger actions regarding unpaid tax bills but this is no longer the case.