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For a business paying your tax on time is, well, fundamental to running it, but what do you know about the ATOs general interest charge (GIC) rate and shortfall interest charge (SIC)? They’re both worth being aware of, especially now as rates for each has recently increased so we thought we’d give you an overview of both while detailing why paying tax on time and in full is pretty much a no-brainer…
The Australian Tax Office (ATO) has two types of interest charges that taxpayers may incur: the general interest charge (GIC) and the shortfall interest charge (SIC). These charges are designed to encourage taxpayers to pay their tax debts on time and in full, as well as to compensate the government for the time in which debts are outstanding. Recently, the ATO has announced an increase in the rates of both the GIC and SIC, which will certainly impact taxpayers who have outstanding tax debts.
A GIC applies to any unpaid tax debts that are not paid by their due date. The rate of GIC is calculated on a daily compounding basis and is based on the Reserve Bank of Australia's cash rate plus a margin. InDecember 2022, the ATO announced an increase in the GIC rate from 7.08% to 7.40%per annum. This increase is significant – especially for those with larger debts – and will impact taxpayers who have outstanding tax debts.
The SIC, is a charge that applies to any tax shortfall, which is the difference between the amount of tax that should have been paid and the amount that was actually paid. The SIC is also calculated on a daily compounding basis and in December 2022, the ATO also announced an increase in the SIC rate from 4.08% to 4.40% per annum.
The ATO has stated that these rate increases are necessary to ensure that taxpayers who have outstanding tax debts are paying their fair share of the tax burden.
The ATO has a number of options available to it to collect unpaid tax debts, including issuing garnishee notices, initiating legal action, and seizing assets. However, the ATO prefers to work with taxpayers to come up with payment arrangements that are manageable and reasonable.
If you have outstanding tax debts you should immediately discuss them with your Attune team contact so we can reach out to the ATO immediately to discuss payment arrangements. The ATO may be willing to enter into a payment plan or offer a hardship variation if you are experiencing financial difficulties.
It is important for all of us to be proactive in addressing tax debts and not to ignore them, as this can lead to further interest charges and even potential legal action if left long enough.
Keep in mind, it’s incredibly important to understand you tax obligations so it’s always worth seeking clarity from the Attune team on your situation if you are in any way unsure of your situation.
Overall, the recent rate increases of both the GIC and SIC serve as a reminder to all taxpayers to pay their tax debts on time and in full.
Once again, reach out to the Attune team if you’re looking for some tailored advice to help you navigate your business or personal tax obligations. Call us on 1300 866 113 or send us an email to start the conversation.
