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 tax 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 tax 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 tax.
- Seeking professional advice can help manage tax debts effectively and explore options like tax debt loans to help avoid the impacts of GIC.
For taxpayers in Australia, understanding tax liabilities and their associated costs is an important part of managing finances effectively. One significant aspect of this is the ATO General Interest Charge (GIC), which is a form of interest that the Australian Taxation Office (ATO) applies to overdue tax debts. Let’s explore what the ATO interest rate is, how it’s calculated, the circumstances under which it applies, and whether it can be remitted.
ATO GIC Explained for Taxpayers
What is GIC? 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?
When does the ATO apply General Interest Charges? ATO late payment interest is triggered by any overdue tax debt or liability. Specifically, it applies in the following situations:
- Failure to Pay Tax Debts: If you miss the due date for payment, the ATO will start applying GIC to the outstanding amount.
- Incorrectly Lodged Tax Returns: If you lodge a tax return late or incorrectly report your tax obligations, the ATO may apply GIC interest rate on any unpaid amount that arises as a result.
- Audit Adjustments: When the ATO conducts an audit and discovers discrepancies, you may owe more than originally assessed, and GIC will apply to the new, larger amount.
ATO GIC Rate and How Often it Changes
The GIC rate is reviewed and updated by the ATO regularly, usually on a quarterly basis. The rate is based on the Australian Government’s borrowing rate plus a margin for administrative costs. As of writing (April 2026), the GIC annual rate is 10.96% per annum, but the current ATO interest rate can change in the following quarter. Taxpayers should stay updated on any changes to the GIC rate ATO, as this will directly affect how much interest is charged 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)
What interest rate does the ATO charge? The ATO charges both GIC and SIC. While both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) are forms of tax penalties in Australia, there is a key difference between them.
- GIC applies when there is an outstanding balance on a tax debt and is charged for late payment.
- SIC, on the other hand, is applied specifically when there is a shortfall in tax that was either under-reported or incorrectly calculated. This often arises during an ATO audit or when taxpayers amend their tax returns after the original submission.
SIC (currently 6.96%) is applied to the shortfall amount for the period when it is originally due and when the assessment is corrected. Like the GIC, the SIC also compounds daily. The due date of SIC is 21 days after the ATO issues the notice of the amended assessment. Once 21 days pass and the SIC is still unpaid, the GIC will apply automatically.
Can I Get GIC ATO Remitted or Waived?
It is possible to have ATO interest charges remitted or reduced, but this is generally only allowed in exceptional circumstances. The ATO may consider remitting GIC in cases where:
- Financial Hardship: If you are experiencing genuine financial hardship and cannot pay your tax debt, you may be able to request a reduction or remission of the GIC. This would usually require providing detailed evidence of your financial situation.
- Special Circumstances: In some cases, the ATO may consider waiving the GIC if there were special circumstances that prevented timely payment, such as illness or a natural disaster. However, this is not a standard practice, and each case is assessed individually.
- Administrative Errors: If the delay in payment or error was caused by an administrative mistake on the part of the ATO, you may be eligible for remission of the GIC.
To request a remission of the general interest charge rate, you would need to contact the ATO directly, provide your reasons for requesting it, and supply any supporting documentation to substantiate your claim. However, this is generally considered 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 tax. 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 tax 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.
