ATO Payment Arrangements, GIC Remission and Director Penalty Notices

Most business owners with ATO debt are trying to solve it with the wrong tool. They ring the ATO, accept whatever instalment figure the automated system offers, and assume the problem is contained. It usually is not — because interest keeps compounding at a rate that is no longer tax-deductible, and because a payment arrangement does nothing at all about a director penalty notice. This guide sets out how arrangements actually work, when the ATO will remit general interest charge, and where the personal liability sits.

The short version

• General interest charge accrues daily and compounds. The rate for the July–September 2026 quarter is 11.43% and for October–December 2026 it is 11.51%.
• Since 1 July 2025, GIC and shortfall interest charge are no longer tax deductible. There is no grandfathering — it applies to interest on old debts too.
• Payment plans of $200,000 or less can generally be set up through ATO online services. Above that, or for terms beyond two years, you have to negotiate.
• A compliant payment arrangement stops your debt being reported to credit reporting bureaus. It does not remit a director penalty.
• GIC remission is discretionary, is decided under PS LA 2011/12, and carries no objection right — which makes how you ask more important than most people realise.

The ground has shifted and the ATO wants payment today

If your experience of dealing with the ATO was formed during or shortly after the pandemic, it is out of date. Two things changed.

The first is posture. The ATO has returned to active collection and says so openly. It is issuing director penalty notices at a rate of 30 to 40 a day, has issued intent-to-disclose notices to businesses whose debts are headed for credit reporting bureaus, and has resumed garnishee action, wind-up proceedings and director penalty recovery. The consistent message from senior ATO officers is that engagement is what separates a business that gets support from one that gets enforcement.

The second is arithmetic, and it is the change almost nobody has priced properly.

GIC is no longer tax deductible — and that changes everything

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 removed the deduction for general interest charge and shortfall interest charge. From 1 July 2025, GIC and SIC are not deductible to any taxpayer. There is no grandfathering: interest accruing now on a debt that arose years ago is caught.

Before that change, GIC at roughly 11 per cent cost a company on the 25 per cent rate about 8.6 per cent after tax. Now it costs the full 11.43 per cent, out of profits that have already been taxed. Put another way, here is what your business has to earn before tax simply to stand still against the interest:

Your tax position	GIC at 11.43% — effective pre-tax cost	Equivalent deductible borrowing rate
Company — 25% rate	About 15.2%	A deductible loan at 15.2% costs the same
Company — 30% rate	About 16.3%	A deductible loan at 16.3% costs the same
Individual — top marginal rate	About 21.6%	A deductible loan at 21.6% costs the same

That is the number that should drive the decision. ATO debt is now one of the most expensive forms of finance available to an Australian business — more expensive than most commercial lending, and in many cases more expensive than an unsecured business loan. A long, comfortable payment plan is not the cheap option it once looked like. It is an expensive one, and the length of the plan is the cost.

The costly consequence of GIC most accountants have not told you

• Stretching a debt over three years at 11.4% non-deductible can cost more in real terms than refinancing it and clearing the ATO balance outright.
• For a business, interest on borrowings genuinely used to fund the business may still be deductible — but the position depends on the tax involved and how the borrowing is structured, and it needs to be checked, not assumed.
• Where GIC accrued in 2024–25 or earlier was claimed as a deduction and is later remitted, the remitted amount is assessable income in the year you receive it. A successful remission of historic GIC can therefore create a tax bill of its own.

How ATO payment arrangements actually work

A payment arrangement is an agreement to pay an existing debt by instalments. It is not a concession, a waiver, or a pause. Three things are true of every arrangement and are worth stating plainly:

• Interest keeps running. GIC continues to accrue on the outstanding balance for the life of the plan. On a long plan with modest instalments, a meaningful share of what you pay goes to interest rather than principal.
• New obligations must be met on time. Every BAS, every instalment, every superannuation payment that falls due during the plan must be paid when due, on top of the plan payments. This is where most arrangements fail.
• Default has consequences beyond the plan. A defaulted arrangement is one of the strongest triggers for garnishee action and director penalty recovery, and it materially weakens your position next time.

The thresholds for ATO payment plans

Situation	What happens
$200,000 or less	Generally able to be set up through ATO online services or the automated phone line, without negotiation.
More than $200,000	You must phone. The ATO will ask for the reasons for non-payment, bank balances, income, expenses, assets and your proposed capacity to pay.
Term longer than 2 years	Requires a call and a negotiated outcome. Longer terms are available but are not granted on request — they are granted on evidence.
Firmer action in the last 6 months	Self-service is not available. The conversation starts from a weaker position and needs to be prepared for.
Two or more defaults in 12 months	Self-service is not available, and the ATO will want to understand what has changed before it agrees to anything.
Insolvent, bankrupt, or in dispute	Handled separately and should not be approached as a routine payment plan request.

The threshold structure tells you something useful: below $200,000 the ATO has largely automated the decision, and above it, a human forms a judgement about whether your business will actually pay. Everything in a long-term negotiation is about giving that person a defensible reason to say yes.

What a compliant payment plan arrangement protects you from

• Credit reporting. The ATO may disclose a business tax debt to credit reporting bureaus where at least $100,000 is overdue by more than 90 days and the business is not effectively engaging. Complying with a payment plan means you are effectively engaging, and the debt is not disclosed. You also receive 28 days’ written notice of intent to disclose, which is a window to act, not a formality.
• Garnishee action. An accepted arrangement you are complying with is the most common reason the ATO withdraws or varies a garnishee notice.
• Escalation generally. Wind-up proceedings, statutory demands and creditor petitions sit at the end of a path that engagement interrupts.

What it does not protect you from is the subject of the next section, and it is the point on which directors are most often given comfort they are not entitled to.

Payment arrangements and director penalty notices run on separate tracks

A payment arrangement deals with how the company repays its debt. A director penalty notice deals with your personal liability. They are governed by different provisions and one does not answer the other.

Entering a payment arrangement is not a statutory remission option. The options that remit a director penalty within the 21 days are: the company pays the debt in full; an administrator is appointed; a small business restructuring practitioner is appointed; or the company begins to be wound up. A plan to pay over time is none of those things.

Two consequences follow. First, the 21 days in the notice keeps running while you negotiate — it is not paused by a call to the ATO or by an arrangement being put in place. Second, because the company debt and your personal penalty are linked liabilities, your exposure is only reduced as instalments are actually paid. Three years into a five-year plan, you remain personally liable for whatever is left.

If a director penalty notice has been issued, you can still become liable even if a payment plan is in place.

• Check the date on the notice, not the date you opened it. The 21 days runs from when the ATO posts it, to the address on the ASIC register.
• Establish whether it is lockdown or non-lockdown. That single question determines whether you have options other than payment.
• Do not rely on a payment arrangement to solve it. Negotiate the arrangement for the company and deal with the personal notice on its own terms, in parallel.

General interest charge remission

GIC is imposed automatically by law. The Commissioner has a discretion to remit it, exercised under the guidance in PS LA 2011/12. Remission is not an entitlement and it is not a negotiation about affordability — it is an argument about circumstances.

The grounds that work

• The delay was caused by circumstances outside your control, and you took reasonable steps to address it once you could.
• The circumstances were not caused by anything you did or failed to do, you acted reasonably to mitigate the effects, and remission is fair and reasonable.
• It is otherwise fair and reasonable to remit, or the cost of recovering the interest is not justified.

The ATO also weighs your broader compliance history. Its stated position is that remission is viewed more favourably where the late payment is out of pattern with an otherwise sound lodgement and payment record. That cuts both ways: a clean history is an asset in a remission request, and a long history of late lodgement is the reason most requests fail.

What a remission request needs

• A specific event or circumstance, identified and dated — not a general account of trading conditions.
• A clear causal link between that circumstance and the failure to pay on time.
• Evidence of what you did to mitigate it, and when.
• Supporting documentation. Assertions without documents are the most common reason a request is refused.
• A calculation of the GIC attributable to the affected period, rather than a request to remit everything.

Two things to know before you ask

There is no objection right against a GIC remission decision. If the ATO refuses, your options are to resubmit with genuinely new information, complain to the Tax Ombudsman, or seek judicial review in the Federal Court. In practice, that means the first request is the one that counts — there is no appeal to fall back on, so it should be properly built rather than sent as a letter and hoped for.

And, as noted above, remission of GIC that was deducted in 2024–25 or an earlier year is assessable income when received. A large remission can be a genuinely good outcome and still require planning for the tax consequences.

How our expert team can get the right payment plan in place

We act for directors and business owners whose tax debt has reached the point where the automated options are no longer enough. The work falls into three parts.

1. Getting the position right before you call

• Reconciling the integrated client account so the figure you are negotiating over is the correct one. Unprocessed lodgements, misapplied credits and remitted penalties routinely overstate a balance.
• Bringing outstanding lodgements up to date, a precondition for almost every outcome worth having — and one that independently affects your director penalty exposure.
• Separating the company’s debt position from your personal exposure, so you know which problem each step solves.

2. Negotiating a long-term arrangement that holds

• Building the cash flow forecast the ATO will accept — one that services the plan and every new obligation as it falls due, with the assumptions documented.
• Modelling the plan term against the real, non-deductible cost of the interest, so the length you ask for is the length that makes financial sense rather than the longest you can get.
• Making the case on debts above $200,000, where the outcome turns on the quality of the submission rather than an automated threshold.
• Handling situations where self-service is closed to you — prior defaults, recent firmer action, or a debt that has already been escalated.
• Renegotiating existing arrangements before they default, which is materially easier than restoring one afterwards.

3. GIC remission

• Identifying whether there is a remission case at all, honestly — not every debt has one, and a weak request spends a first attempt that cannot be repeated.
• Building the request around the statutory grounds and PS LA 2011/12, with the chronology, causation and evidence set out properly.
• Quantifying the GIC attributable to the affected period, so the ATO is being asked for something specific and defensible.
• Advising on the assessable recoupment consequence where historic GIC was previously deducted, before the remission lands.
• Where a request is refused, advising on whether there is genuinely new information, or whether the Tax Ombudsman is the better route.

Where the debt is beyond what an arrangement can sensibly carry, we say so, and we advise on the restructuring options — including small business restructuring and voluntary administration — rather than selling a plan that will fail.

Frequently asked questions

Talk to Business Tax Debt Help about getting the right payment plan in place today

• We negotiate long-term ATO payment arrangements, prepare general interest charge remission requests, and advise directors on personal liability under director penalty notices.
• To get started, send us your integrated client account statement, your outstanding lodgement position and your last two years of financials. That is enough for us to tell you what arrangement is realistic, whether there is a remission case, and where your personal exposure sits.
• If a director penalty notice has already been issued, contact us before anything else — the 21 days is running and it changes the order in which everything has to happen.