The tax rules specify interest rates for situations where you pay the Tax Office interest on late payments, and also for some situations in which the tax offices owes you – for example an over-payment, an early payment or delayed refund.
Daily interest rate credits for early or over-paid tax are based on the quarterly average Reserve Bank 90 day bill acceptance rates, in accordance with Section 8AAD of the Tax Administration Act.
When you pay the Tax Office, a margin is added (see further below).
The Reserve Bank 90 day bill rates are published in a spreadsheet “Interest Rates and Yields – Money Market – Monthly – F1.1“.
When you owe the Tax Office
ATO General Interest Charge (GIC) Interest Rates, SIC and penalties
Financial penalties administered by the Tax Office have a number of possible components:
- an administrative penalty, based on the degree of culpability; and
- Interest, comprising either or both of:
- shortfall interest charge (SIC) which is applied on a daily basis to understatements of tax on the period from original assessment due date to the amended assessment due date
- general interest charge (GIC) which is applied to overdue tax debts (including SIC and penalties) on a daily basis, from due date to date of payment
Administrative penalties are applied to a wide range of transgressions, not necessarily just involving a shortfall of tax, but include for example, the late or non-lodgement of returns or other documents.
They can be calculated as a percentage of the tax involved, or as a multiple of “penalty units” which have a fixed dollar value.
There is a hierarchy of penalties based on culpability and the level of cooperation.
The penalty regime applies to most taxes, including income tax, FBT, GST and PAYG.
The Tax Office also has the power to prosecute offences in a court, in practice generally reserved for more serious cases. Information about the ATO Disputes policy and mechanisms can be viewed here. (pdf)
CURRENT DEBIT INTEREST RATES:
The GIC interest rates schedule (updated quarterly) set by reference to the 90-day Bank Bill rate plus 7%
The SIC interest rates schedule (updated quarterly) set by reference to the 90-day Bank Bill rate plus 3%
Both GIC and SIC ATO interest charges are tax deductible. The general interest charge is deductible in the year that it accrues, while the shortfall interest charge is deductible in the year that the taxpayer is given notice of the liability.
Any recoupments of GIC or SIC are assessable income.
PS LA 2006/8 – remission of SIC and GIC for shortfall periods
When the Tax Office owes you
For individuals, companies, taxable trusts and super funds, the tax rules provide for interest to be be paid in specific circumstances of an over-payment, an early payment or delayed refund. See more information here: PS LA 2011/23 Credit interest
Such interest received must be included in taxable income, for which the Tax Office updates its tax return guides annually. See 2018 interest guide (individuals and trusts) here.
As noted above, the interest rate paid is calculated using a Reserve Bank published average quarterly 90 Bills acceptance rate.
The quarterly interest rates are based on the Reserve Bank’s published months of November, February, May and August, in respect of the March, June, September and December quarters respectively (Section 8AAD). The Reserve bank’s monthly rates are published in a regularly updated spreadsheet here.
The Tax Office publish the credit interest rates annually for inclusion in tax return instruction guides.
To find out the credit rates applicable to periods since the tax year end, the relevant monthly rate can be referenced from the Reserve Bank spreadsheet, or looked up from the updated GIC debit interest tables, with the credit rate determined by subtracting the 7% debit surcharge.
Further Information (ATO links)
- Once in 3 years automatic penalty relief
- Interest and penalties
- ROSA in brief – Shortfall Interest Charge (PDF)
This page was last modified 2018-12-17