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.
From 1 July 2025: GIC is No Longer Tax Deductible
From 1 July 2025, businesses can no longer claim a tax deduction for General Interest Charge (GIC) or Shortfall Interest Charge (SIC) imposed by the ATO.
Before this change, many businesses could claim GIC interest as a deductible business expense. That reduced the effective cost of carrying ATO debt because the interest formed part of the business’s tax deductions. This change is meant to strengthen the purpose of these charges, which is to encourage timely and correct payments. Making GIC and SIC non tax deductible increases the cost of delayed payments and is a major step the ATO is taking to reduce outstanding tax debts.
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.
ATO GIC vs Commercial Tax Debt Loans
Many business owners compare ATO GIC to the interest rate on a commercial tax debt loan. Which one is cheaper?
How ATO GIC Works
The ATO applies General Interest Charge, GIC, on overdue tax debts daily. The rate is indexed quarterly and is usually significantly higher than standard business lending rates.
GIC compounds daily, which means interest is charged on both the original debt and previously accrued interest. Over time, this can cause tax debt to grow rapidly, particularly when repayments are only covering part of the interest being charged.
How Commercial Tax Debt Loans Work
Commercial tax debt loans work differently depending on the lender and product type, but they are generally structured with:
- Fixed or variable interest rates
- Set repayment terms
- Monthly repayments
- No daily compounding GIC charges from the ATO
- Potential tax deductibility on interest
Unlike ATO GIC, many commercial loan products use standard amortised repayments rather than daily penalty style compounding. This gives businesses clearer repayment timeframes and more predictable cash flow management.
The Difference in Real World Cost
A business carrying a large ATO debt on a long term payment arrangement can end up paying substantial amounts in non deductible interest while the debt reduces slowly. GIC still applies even with an ATO payment plan, so costs can add up as long as the debt is not fully paid.
By contrast, a commercial tax debt loan may offer lower rates than the current GIC rate. The interest rate is applied to the whole loan amount, and the interest does not accrue daily like the GIC. For many business owners, paying off tax debt with a commercial loan is the more practical choice.
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.
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.
Options To Consider When You Can’t Pay ATO GIC
Ignoring ATO interest charges rarely improves the situation. GIC compounds daily, and once repayments fall behind, the balance can increase quickly. If your business cannot keep up with GIC or existing ATO payment arrangements, acting early usually gives you more options and better outcomes.
Here are three common solutions businesses use when ATO GIC becomes unmanageable.
1. Renegotiate Your ATO Payment Arrangement
The ATO may agree to revise an existing payment plan if your business circumstances have changed.
The ATO will usually want updated financial information, including cash flow details and outstanding liabilities.
This option may help if your business is still viable but experiencing short term pressure. The downside is that GIC generally continues accruing while the debt remains unpaid.
2. Refinance the Tax Debt with a Commercial Tax Debt Loan
Many businesses refinance ATO debt into commercial lending products to stop ongoing GIC charges and create more manageable repayments.
A commercial tax debt loan may provide lower effective borrowing costs than ongoing ATO GIC, particularly after the July 2025 removal of GIC deductibility.
Repayments can also be lower since tax debt loans can have longer terms than ATO payment plans.
3. Apply for GIC Remission with the ATO
In some situations, the ATO may agree to remit, meaning reduce or remove, part of the GIC that has been charged.
GIC remission is not automatic. The ATO generally considers remission requests where businesses can demonstrate circumstances such as:
- Serious financial hardship
- Events outside the business’s control
- Natural disasters or unexpected disruptions
- Errors or delays caused by the ATO
- Genuine attempts to comply with tax obligations
The ATO will usually expect businesses to show they are actively working toward resolving the debt, including lodging outstanding returns and maintaining current obligations moving forward.
Businesses struggling with large tax debts often benefit from engaging with the ATO early rather than waiting for enforcement action to escalate. In many cases, proactive communication creates more flexibility around payment arrangements, remission requests, and recovery action.
How a Tax Debt Loan Can Help with GIC
For taxpayers struggling with overdue tax obligations, a tax debt loan can provide an effective solution to manage and reduce the financial strain. These loans are specifically designed to help businesses pay off their tax debts, and in turn, stop the GIC from continuing to accumulate.
Here’s how they can help:
- Paying Off Tax Debts Quickly: By taking out a tax debt loan, you can pay off your outstanding debt in full, including the GIC. This clears your tax liability and halts the daily compounding interest, preventing the GIC from growing further.
- Potentially Lowering the Interest Rate: Many tax debt loans can be offered at a rate much lower than the current GIC rate of 11.17%. By consolidating your ATO debt into a loan with a lower rate, you could significantly reduce the overall cost of repaying your debt.
- Flexible Repayment Terms: Tax debt loans often come with more flexible repayment terms than those set by the ATO for their payment plans. This can make managing your repayments more manageable, as you can tailor the repayment schedule to suit your financial situation.
- Reducing Financial Stress: For many taxpayers, dealing with overdue debts and the GIC can lead to significant stress and anxiety. A tax debt loan can provide the peace of mind of knowing your tax debt is managed efficiently, allowing you to focus on other aspects of your financial and personal well-being.
If you want to learn more about this type of financing, check out our tax debt loans guide.
Frequently Asked Questions
Yes, the ATO can remit part or all of the General Interest Charge in certain situations. Remission is assessed on a case by case basis and usually requires evidence of circumstances outside your control, financial hardship, or administrative errors on the ATO’s part.
No. From 1 July 2025, businesses can no longer claim tax deductions for ATO General Interest Charge or Shortfall Interest Charge. This has increased the effective cost of carrying tax debt.
Yes, GIC compounds daily. Interest is charged not only on the original tax debt but also on previously accrued interest, which can cause balances to grow quickly over time.
In many cases, yes. While interest rates vary, commercial tax debt loans can reduce the overall cost of the debt because they may offer lower effective rates, structured repayments, and potentially deductible interest depending on the business purpose and circumstances.
If tax debt remains unpaid and unresolved, the ATO can escalate recovery action. This may include Director Penalty Notices, garnishee notices, default assessments, legal proceedings, or reporting tax defaults to credit agencies. Acting early usually provides more options and greater flexibility.
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.
