Key Takeaways
- The ATO General Interest Charge (GIC) is a fee that is added to overdue tax debts every day to encourage people to pay on time.
- When a taxpayer doesn't pay their taxes on time or files a tax return incorrectly, the GIC kicks in.
- The amount of GIC is based on the amount of unpaid debt, a daily compounding interest rate, and how long the debt stays unpaid.
- Tax penalties and interest on unpaid debts keep adding up as long as the debt is still owed, making the total amount owed higher.
- The GIC rate is checked every three months and is based on the Australian Government's borrowing rate plus a small extra amount.
- GIC is for tax debts that are late, and SIC is for tax amounts that are underpaid because of mistakes or audits.
- As of July 1, 2025, GIC and SIC will no longer be tax-deductible in Australia. This means that people who owe taxes will no longer be able to get a deduction for the interest they pay on those debts.
- GIC can be remitted in special cases, like extreme financial hardship, special circumstances, or administrative errors by the ATO.
- It's important to keep up with changes to the GIC rate because they can affect how much interest is charged on unpaid taxes.
- Seeking professional advice can help manage tax debts effectively and explore options like tax debt loans to help avoid the impacts of GIC.
Understanding tax obligations and the costs that come with them is a key part of managing finances well for Australian taxpayers. One important part of this is the ATO General Interest Charge (GIC), which is a type of interest that the Australian Taxation Office (ATO) charges on tax debts that are past due. Let’s find out what the ATO GIC is, how it’s calculated, when it applies, and if it can be remitted.
ATO GIC Explained for Taxpayers
What is the ATO General Interest Charge? The ATO charges GIC interest on tax debts that are still unpaid after the due date. It is meant to get people to pay their bills on time and keep things fair between people who pay on time and people who don’t. The GIC is based on the part of the debt that hasn’t been paid yet and grows every day. This fee applies to many different types of tax debts, such as income tax, goods and services tax (GST), and other debts owed to the ATO.
What Triggers the General Interest Charge on Tax Debts?
GIC happens when a tax debt or liability is past due. In particular, it applies in these situations:
- The ATO will start adding GIC to the amount you owe if you don’t pay by the due date.
- If you file your taxes late or don’t report your tax obligations correctly, the ATO may charge GIC on any unpaid amount that comes up as a result.
- When the ATO audits you and finds mistakes, you may owe more than you thought, and GIC will apply to the new, larger amount.
GIC Rates and How Often They Change
The ATO checks the GIC rate and makes changes to it on a regular basis, usually every three months. The rate is the same as the Australian Government’s borrowing rate, plus a little extra to cover administrative costs. The GIC annual rate is 10.78% as of August 2025, but this could change in the next quarter. Taxpayers should keep an eye on any changes to the GIC rate, since this will have a direct impact on how much interest they have to pay on their tax debts.
How the ATO Calculates General Interest Charge
How does the ATO calculate GIC? GIC is calculated using a daily compounding formula based on the GIC rate, which is set by the ATO.
To understand how it works in practice, here’s an example of how the ATO calculates the GIC:
- Debt Amount: Suppose you have a tax debt of $10,000.
- GIC Rate: Let’s say the GIC rate is 10.78% per annum. The daily interest would be calculated as:
- Daily Interest Rate = 10.78% / 365 = 0.0295% per day.
- Daily Interest Rate = 10.78% / 365 = 0.0295% per day.
- Daily Interest: Multiply the daily interest rate by the amount of the unpaid debt.
- Daily Interest = $10,000 * 0.0295% = $2.95 per day.
- Daily Interest = $10,000 * 0.0295% = $2.95 per day.
- Accruing Interest: This interest continues to accrue daily, meaning that the longer the debt remains unpaid, the more interest you will owe.
This compounding daily interest can pile up significantly, so it is important to pay off your tax debts as soon as possible to avoid additional costs.
GIC vs Shortfall Interest Charge (SIC)
In Australia, both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) are types of tax penalties, but they are not the same.
GIC applies when a tax debt is still owed and is charged for paying it late.
On the other hand, SIC is only used when there is a tax shortfall that was either underreported or calculated incorrectly. This happens a lot during an ATO audit or when taxpayers change their tax returns after they have already sent them in.
SIC (currently 6.78%) is added to the amount of the shortfall for the time it was due and the time the assessment is corrected. The SIC also adds up every day, just like the GIC. The SIC is due 21 days after the ATO sends out the notice of the revised assessment. The GIC will automatically apply after 21 days if the SIC is still not paid.
Can I Get GIC Remitted or Waived?
You can get ATO interest charges dropped or lowered, but this is usually only allowed in very rare cases. The ATO might think about waiving GIC in some situations, such as:
- Financial Hardship: If you really can’t pay your tax debt because of genuine financial hardship, you might be able to ask for a lower or waived GIC. In most cases, you would need to show proof of your financial situation in detail.
- Special Circumstances: The ATO may decide to waive the GIC in some cases if there were special circumstances that made it impossible to pay on time, like getting sick or a natural disaster. This is not a common practice, though, and each case is looked at on its own.
- Administrative Mistakes: If the ATO made a mistake that caused the payment to be late or an error, you may be able to get the GIC back.
To request remission of the GIC, you need to call the ATO directly, explain your situation, and send in any documents that support your claim. But this is usually looked at on a case-by-case basis and is not guaranteed.
Is GIC Tax-Deductible in Australia?
Beginning on July 1, 2025, you can’t deduct any GIC or SIC from your taxes. The goal of these fees is to get people to pay on time and in full, and this change is meant to help that happen. The ATO is taking a big step to lower unpaid tax debts by making GIC and SIC non-tax-deductible. This makes late payments more expensive.
How a Tax Debt Loan Can Help with GIC
If you owe back taxes and are having trouble paying them, a tax debt loan can help you handle the stress and lower the amount you owe. Here’s how they can help:
Quickly Paying Off Tax Debts
When you take out a tax debt loan, you can pay off all of your debts in one go. This stops the daily compounding interest and clears your tax debt, so the GIC won’t grow any more.
Possibly Lowering the Interest Rate
The current GIC rate is 10.78%, but many tax debt loans can be offered at a much lower rate. If you combine your ATO debt along with your other debts into a loan with a lower interest rate, you could save a lot of money on the total cost.
Flexible Repayment Terms
Tax debt loans usually have more flexible terms than the ones the ATO sets for its payment plans. You can make your repayments easier to handle by changing the schedule to fit your finances.
Lessening Financial Stress
For a lot of taxpayers, dealing with overdue debts and the GIC can be very stressful. A tax debt loan can give you peace of mind by making sure that your tax debt is handled well, so you can focus on other parts of your personal and financial health.
If you want to learn more about this type of financing, check out our tax debt loans guide.
Final Thoughts
Taxpayers in Australia need to know what the ATO General Interest Charge is. GIC is a daily compounding interest rate that applies to unpaid tax debts. It won’t be tax-deductible for much longer, and it keeps growing until the debt is paid off. You might be able to get the GIC remitted or lowered in some cases, but this is usually only possible in very special situations. GIC rates change all the time, so it’s important to keep up with them to avoid paying more than you have to.
The GIC is one of the hardest things you’ll have to deal with when you owe money to the ATO. That’s why you need to look for answers right away. You can make a payment plan with the ATO, but the GIC will still be in effect. A tax debt loan is another option. It pays off all of your tax debts, so you don’t have to worry about GIC anymore.
Get a Tax Debt Loan for Your Business
If you're struggling with late tax payments or need a tax debt loan, you should consult with a lending professional like Dark Horse Financial. We’re experts in tax debt lending, and we’ll help you face ATO debt head-on and avoid GIC.
