All About the ATO General Interest Charge

If you have a tax debt, the ATO charges interest on it. That interest is the General Interest Charge, or GIC. It is a daily-compounding charge that sits on top of the underlying tax debt and grows the longer the debt remains unpaid.

The way the GIC works has changed in important ways recently. Most significantly, neither the GIC nor the Shortfall Interest Charge (SIC) are deductible anymore for amounts incurred from 1 July 2025. The ATO has also updated its published guidance on how it approaches remission requests. This article walks through what the GIC is, where it applies, where it does not (including Director Penalty Notices), and what the ATO’s current approach to reducing the charge looks like in practice.

What the GIC is and how it is calculated

The GIC is set by formula in the tax legislation. The rate is recalculated each quarter and works out to roughly twice a standard mortgage rate, although it sits well below typical credit card rates. It accrues daily and compounds daily, so a debt that is left to drift for a year ends up materially larger than the headline rate would suggest.

The GIC will appear on your ATO statements and account transactions. It accrues every day the debt is outstanding, but the ATO usually posts it to your account in blocks rather than line-by-line, anywhere from a few days to a month at a time.

What the GIC applies to

The GIC attaches to most amounts a taxpayer owes the ATO, including:

• income tax owing on a lodged return
• PAYG instalments
• GST
• PAYG withholding
• administrative penalties such as failure-to-lodge penalties and default penalties
• previously accrued GIC itself, because of the daily compounding

The ATO’s stated rationale for the GIC is threefold: to encourage timely payment, to ensure that taxpayers who pay late or underpay don’t gain an unfair financial advantage over those who pay on time, and to compensate the community for the cost of late payment.

What the GIC does not apply to: Director Penalty Notices

This is one of the most misunderstood areas of the regime, and it matters because directors who receive a DPN often assume the worst.

A Director Penalty Notice makes a director personally liable for certain unpaid company tax obligations — primarily PAYG withholding, GST and superannuation guarantee charge. The amount in the DPN is a penalty equal to the company’s underlying liability, not the underlying liability itself.

The legislation that authorises the GIC does not extend it to director penalties. There is no provision allowing the ATO to charge GIC on the personal liability created by a DPN. The Commissioner has no power to make a director personally liable for GIC.

The GIC continues to accrue on the company’s underlying debt, of course. But the personal liability the director faces under the DPN is fixed at the penalty amount. If you receive a DPN, the figure on the notice is what is in play against you personally — it does not silently grow with daily interest the way the company’s debt does.

This is a meaningful distinction when a director is weighing options such as paying the penalty, placing the company into administration, or contesting the notice. It also matters when negotiating with the ATO, because directors and their advisers occasionally proceed on the (incorrect) assumption that interest is ticking on the personal exposure.

GIC and SIC are no longer deductible

This is the biggest change to the regime in years.

For GIC and SIC amounts incurred on or after 1 July 2025, taxpayers can no longer claim a deduction for the interest charged by the ATO. The change applies regardless of whether the underlying tax debt relates to an earlier income year.

Before the change, GIC and SIC were deductible in the year they were incurred (which is generally the year the assessment imposing them is issued, not the year the debt originally arose). Under the old rules, a taxpayer who lodged a late return for an old year could pick up several years of accrued interest as a deduction in the current year. That is no longer available.

A few practical consequences flow from this:

The effective cost of the GIC is now significantly higher. Previously, a taxpayer on the top marginal rate effectively bore around 53 per cent of the headline rate after the deduction. Now they bear all of it.

If GIC is later remitted by the ATO, there is no longer a corresponding income inclusion for the remitted amount. The ATO has confirmed that because the interest itself is non-deductible, any GIC or SIC that is later remitted does not need to be brought to account as assessable income. Under the old rules, a successful remission produced taxable income equal to the previously-deducted interest — that nasty surprise no longer arises for post-1 July 2025 amounts.

The change strengthens the case for paying tax debts down quickly, or for borrowing commercially to pay them out. Interest on a commercial loan used for income-producing purposes can still be deductible in the ordinary way, even though GIC on the same underlying debt is not. The arithmetic of refinancing a tax debt has shifted considerably in favour of refinancing.

For interest amounts incurred before 1 July 2025, the old deductibility rules continue to apply, so any GIC that accrued and was incurred before that date can still be claimed in the year it was incurred.

The GIC and payment plans

The GIC keeps accruing while you are in a payment plan. The ATO is explicit that GIC continues to apply for as long as there is an overdue debt on the account. The longer the plan, the more interest you will pay over its life. When you negotiate a plan with the ATO, the monthly payment has to cover both the principal and the running interest, so a $48,000 debt over two years is not $2,000 a month — it is meaningfully more once GIC is layered in.

Because the rate is reset quarterly, the exact total cost of a multi-year plan cannot be known at the outset. In practice the ATO usually models payments using the rate prevailing at the time the plan is negotiated.

With the loss of deductibility, the real cost of dragging a debt out under a payment plan has gone up. Shorter plans, larger upfront payments, and where feasible commercial refinancing all look more attractive than they did before 1 July 2025.

The ATO’s current approach to remitting GIC

The ATO has discretion to remit some or all of the GIC. This is one of the few practical levers a taxpayer has to reduce an interest bill, and the way the ATO exercises the discretion has tightened in recent years. The Commissioner’s current published approach is set out in Practice Statement Law Administration PS LA 2011/12, with day-to-day guidance on the ATO website. It is worth understanding how the ATO actually thinks about these requests before lodging one.

What the ATO wants to see in a request

The ATO has been increasingly explicit about the information it expects in a GIC remission request. A request that does not address the following points is unlikely to succeed:

• the specific event or circumstance that caused the late payment giving rise to the GIC
• how that event or circumstance prevented payment by the due date — including some explanation of why the taxpayer otherwise would have paid on time
• what steps the taxpayer took to mitigate the consequences once the issue arose
• supporting evidence to substantiate the explanation

The ATO will then weigh that material against whether the delay was within the taxpayer’s control, whether it is fair and reasonable to remit even if it was, and the taxpayer’s prior compliance and payment history.

Compliance history is doing more work than it used to

Compliance history has become central. The ATO has signalled that it will look more favourably on requests where the late payment is “out of pattern” with the taxpayer’s lodgment and payment behaviour over the previous several years. Conversely, a pattern of late lodgments, missed instalments or repeated payment plans makes a remission progressively harder to obtain, regardless of how compelling the immediate reason is.

For smaller amounts — the ATO has identified $2,500 or less as an indicative threshold — a clean compliance history will strongly influence the outcome on its own. For larger amounts, compliance history is necessary but not sufficient; the substantive reason for the delay still has to do real work.

The four traditional grounds still apply

PS LA 2011/12 frames the discretion around four broad categories:

• the delay was caused by circumstances outside the taxpayer’s control, and the taxpayer took reasonable steps to mitigate
• the taxpayer caused the delay, but it would still be fair and reasonable to remit
• there are special circumstances justifying remission
• it is otherwise appropriate to remit

In practice, categories one and two carry most of the load. Category three is reserved for genuinely unusual situations, and category four is rarely used as a primary ground.

SIC remission is assessed differently

For SIC, the ATO’s published considerations are slightly different and reflect that SIC arises out of an amended assessment rather than late payment of a known debt. The factors the ATO weighs include the taxpayer’s compliance history, the underlying reason for the shortfall, whether the shortfall came to light through voluntary disclosure or ATO compliance activity, the extent to which any ATO delay contributed to the SIC accruing, and any factors beyond the taxpayer’s control affecting the size or duration of the shortfall. The relevant ATO practice statement is PS LA 2006/8.

Voluntary disclosure is particularly important for SIC. A taxpayer who comes forward before being audited tends to fare materially better on remission than one whose shortfall is uncovered by the ATO.

Common pitfalls

A few recurring issues sink remission requests:

• Generic or template-style submissions that do not engage with the taxpayer’s specific facts. The ATO sees a great deal of these and they tend to be rejected quickly.
• Failing to provide evidence. Assertions about illness, business disruption or third-party failures need to be backed by documentation.
• Asking for full remission when partial remission is the realistic outcome. A request that acknowledges the taxpayer bears some responsibility, and asks for remission of a defined portion, is often more credible than an all-or-nothing claim.
• Lodging the request before the underlying tax is paid or a payment plan is in place. While there is no strict rule that the primary tax must be paid first, the ATO will generally consider the request more favourably if the taxpayer has already engaged with the underlying liability.

Review rights are limited — and that has not changed

If the ATO refuses to remit GIC, the taxpayer’s options are narrow. There is no right of objection. The ATO’s current guidance confirms that a taxpayer cannot lodge an objection or take a refusal to remit GIC to the Administrative Review Tribunal (which has replaced the Administrative Appeals Tribunal). The only formal review available is judicial review in the Federal Court under the Administrative Decisions (Judicial Review) Act 1977, which is expensive and rarely successful.

The ATO does, however, allow a taxpayer to submit a new remission request if there is a key piece of information that was left out of the first request, or if the taxpayer believes a particular error was made in the original decision. This is a practical second bite at the apple, but it requires genuinely new material — a re-argument of the same points will not help.

For SIC, the position is more generous. If the unremitted SIC is more than 20 per cent of the underlying shortfall, the taxpayer can object to the refusal in the ordinary way and, if dissatisfied with the objection outcome, seek review in the Administrative Review Tribunal. If it is 20 per cent or less, an internal review process is available. Judicial review in the Federal Court remains available as well.

The practical takeaway on remission

The remission process is more structured and less forgiving than it was a decade ago, but it is still a real avenue. The taxpayers who succeed are typically those who: identify a specific event causing the delay, evidence it properly, demonstrate that they took reasonable steps to mitigate, can point to a clean compliance history, and ask for an outcome that is proportionate to the facts. Because the first request is effectively the one that counts, it is worth taking time to get it right rather than firing off a quick letter and hoping.

The GIC on re-raised tax debts

The ATO can decide not to actively pursue a tax debt where pursuit would be uneconomical — typically where the taxpayer appears to have no income or assets. The debt is not extinguished; it is parked. If the taxpayer’s circumstances change, often signalled by a tax return showing renewed income, the ATO can re-raise the debt and resume collection.

The GIC continues to accrue across the dormant period and is added to the debt when it is re-raised. The ATO has discretion to remit GIC that accrued while it was not actively pursuing the debt, and a remission request along those lines is often appropriate when an old debt is revived.

The GIC on disputed tax debts

If you are disputing a tax debt through an objection, ART proceedings or a court appeal, the GIC continues to accrue while the dispute runs. You can limit the exposure by entering a 50/50 arrangement: pay all undisputed tax plus 50 per cent of the disputed amount, and the ATO agrees not to take recovery action and to remit 50 per cent of the GIC accruing from the date of payment until the dispute is resolved.

How the GIC differs from the Shortfall Interest Charge

If your assessment is amended upwards — by you or as a result of an audit — the additional tax is a shortfall. The interest the ATO charges on the shortfall is the SIC, not the GIC. The SIC rate runs four percentage points below the GIC rate, reflecting the fact that the taxpayer did not know about the underlying debt during the period the interest is being calculated.

The SIC runs from when the original tax was due until 21 days after the amended assessment issues. From day 22 onwards the GIC takes over, on the unpaid shortfall and any unpaid SIC.

The same 1 July 2025 deductibility change that applies to the GIC applies to the SIC. SIC incurred from that date forward is not deductible.

Where this leaves taxpayers

Three points stand out from the current state of the law:

The GIC is now a more expensive problem than it used to be. It compounds daily, the rate is high, and from 1 July 2025 there is no deduction to soften the blow. Anything that shortens the life of an ATO debt — a faster payment plan, a lump sum, refinancing into a deductible commercial loan — is worth more than it used to be.

Directors facing a DPN should be clear-eyed about what is and is not in play. The personal liability under a DPN does not attract GIC. The figure on the notice is the figure. The company’s debt is a separate matter and continues to grow.

Remission is still on the table, but the ATO’s approach has tightened. Compliance history, specificity, evidence and proportionality are doing more work than they used to, and the lack of merits review of a refusal makes the first request the one that counts.

If you are dealing with an ATO debt, a DPN, or a remission request, it is worth getting tailored advice — particularly given how much the economics have shifted since the deductibility change took effect.