ATO clarifies who can have interest charges reduced or removed

The Australian Taxation Office (ATO) has released new guidance explaining when it may reduce or cancel the General Interest Charge (GIC). The GIC is the interest applied to unpaid tax debts after the due date. This update provides useful clarity on when relief may be granted and when it is unlikely to be approved. The clarity comes following mounting criticism regarding the ATOs handling of taxpayer relief provisions. 

Each request for GIC remission (reduction or removal of interest) is assessed individually. Your specific circumstances, compliance history and actions taken to address the debt will all be considered. While outcomes will always depend on the details of each case, the ATO has now provided examples to help taxpayers better understand what may be accepted or declined.

Situations where interest may be reduced or removed

The ATO has indicated it is more likely to approve a remission request where circumstances were outside your control and directly affected your ability to meet your tax obligations.

Examples include:

• Natural disasters such as fire, flood or drought affecting you or your business
• Theft, property damage or events that disrupt business operations
• Bereavement or sudden serious illness affecting you, key staff or your tax/BAS agent
• Family and domestic violence, financial abuse or other serious personal hardshipIndustrial action that prevented you or your agent from meeting obligations
• Unexpected collapse of a major debtor impacting your cash flow

Remission is also more likely where you have a good compliance history and have taken steps to engage with the ATO early, such as contacting them to discuss payment options and making reasonable efforts to pay when you can.

Situations where requests are less likely to be approved

The ATO has also clarified circumstances where remission is unlikely. These generally relate to normal business or economic risks rather than exceptional events.

Examples include:

• General cash flow issues or difficult business conditions
• Broader economic downturns
• Currency fluctuations or market changes
• Late payment by customers or creditors
• Using available funds to expand a business instead of paying tax debts
• Missing deadlines due to poor planning or not allowing enough time for your tax agent
• Being on holiday when a lodgement or payment was due

In these cases, the ATO considers the interest charge to be a normal consequence of late payment rather than something that warrants special relief.

Why this guidance matters

Interest charges on overdue tax have increased significantly in recent years, and many taxpayers and advisers have called for greater consistency and transparency in how remission requests are handled. In response, the ATO has released these examples and moved requests for penalty and interest remission to a dedicated team and online process.

This should provide a more consistent approach, but outcomes will still depend on individual circumstances and the supporting information provided.

The key takeaway

If you are experiencing difficulty meeting ATO lodgement or payment obligations, it is important to act early. Contacting our office promptly allows us to work with you and, where appropriate, approach the ATO to discuss payment arrangements or request interest remission.

The earlier a conversation happens, the more options are usually available.