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.
Do not hesitate to contact your Harris Black team member should you require any assistance or further clarification.