Key Takeaways
- GIC applies to unpaid tax debts, while SIC applies to tax shortfalls before an amended assessment is issued.
- The General Interest Charge is designed to encourage taxpayers to pay outstanding tax debts on time and continues accruing daily until the debt is cleared.
- The Shortfall Interest Charge compensates the ATO for the time a tax shortfall remained unpaid before an amended assessment is issued.
- The SIC rate is generally lower than the GIC rate because it applies during a different stage of the tax assessment process.
- In some circumstances, both SIC and GIC can apply to the same tax liability, although they apply during different periods.
- Paying tax debt quickly, whether directly or through finance, stops additional GIC from accumulating and can reduce the overall cost of the debt.
Two ATO Interest Charges That Often Get Confused
Although both are imposed by the Australian Taxation Office, GIC and SIC serve different purposes and apply in different situations. Understanding the difference between GIC and SIC can help you better manage your tax obligations and avoid unnecessary costs.
GIC is applied when a tax liability remains unpaid after its due date. SIC, on the other hand, applies when the ATO determines that you have underpaid tax because your assessment was incorrect and later issues an amended assessment.
Knowing which charge applies can also help you understand your options. Depending on your circumstances, you may be able to request remission of some interest, negotiate a payment arrangement with the ATO, or refinance your tax debt into a more manageable business loan. Tax debt finance is one option businesses use to stop GIC from continuing to accrue while they repay the amount over a longer period.
General Interest Charge (GIC): When It Applies
The General Interest Charge is the ATO’s primary interest charge for overdue tax liabilities. Once a tax debt passes its due date without being paid in full, GIC generally begins accruing on the outstanding balance.
This charge applies across many types of tax obligations, including:
- Income tax
- GST
- PAYG withholding
- Superannuation Guarantee Charge
- Other outstanding ATO liabilities
Unlike a one off penalty, the ATO calculates GIC daily using a daily compounding methodology. The longer the debt remains unpaid, the larger the interest amount becomes.
Why the ATO Charges GIC
The purpose of GIC is to compensate the government for the time value of unpaid tax and encourage taxpayers to meet their obligations on time.
Rather than applying a fixed late fee, the ATO calculates interest daily so the cost reflects how long the debt remains outstanding.
Examples of When GIC Applies
GIC commonly applies in situations such as:
- A BAS liability is not paid by the due date.
- An income tax assessment remains unpaid after the payment deadline.
- An amended assessment becomes payable and is not paid by its due date.
- An employer fails to pay Superannuation Guarantee obligations when required.
Once GIC starts, it generally continues every day until the outstanding balance is paid in full. This means that even with an ATO payment plan, GIC will still accrue.
How GIC Can Grow
Many business owners underestimate how quickly daily compounding interest can increase the total amount owed.
For example, if a business owes $150,000 to the ATO and delays payment for several months, the accumulated GIC may add thousands of dollars to the overall debt. The longer repayment is delayed, the more expensive the debt becomes.
This is why businesses experiencing cash flow issues often explore funding options before the interest becomes unmanageable.
Is the GIC Tax Deductible?
No. General Interest Charge (GIC) incurred on or after 1 July 2025 is no longer tax deductible. The same rule also applies to Shortfall Interest Charge (SIC) incurred on or after that date.
Before 1 July 2025, businesses and individuals could generally claim a tax deduction for GIC and SIC in the income year the interest was incurred. However, legislation introduced from 1 July 2025 removed this deduction, making it more expensive to carry an ATO tax debt.
This means that if your tax debt continues to accrue GIC, you not only pay interest at the current annual rate of 11.43%, but you also lose the tax deduction that was previously available.
For many businesses, this increases the overall cost of delaying payment. Paying the debt as soon as possible, negotiating an ATO payment arrangement, or refinancing the debt through a tax debt loan can help reduce the amount of GIC that continues to accrue. Tax debt finance may also provide greater repayment flexibility while preventing additional GIC from accumulating once the ATO debt has been paid out.
Shortfall Interest Charge (SIC): When It Applies
While GIC applies to overdue tax debts, the Shortfall Interest Charge applies in a different situation.
SIC is charged when the ATO amends a tax assessment and determines that additional tax should have been paid earlier.
Rather than being a penalty for late payment, SIC compensates the ATO for the period during which the taxpayer had use of funds that should have been paid as tax.
What Creates a Tax Shortfall?
A tax shortfall occurs when the amount of tax originally assessed is lower than the amount that should have been assessed.
This can happen for several reasons, including:
- Errors in lodged tax returns
- Omitted income
- Incorrect deductions
- Incorrect tax calculations
- Adjustments following an ATO audit or review
Once the amended assessment is issued, the ATO calculates SIC for the period between the original assessment date and the amended assessment.
Why SIC Exists
The ATO recognises that many shortfalls arise because an assessment is corrected after it has already been issued.
Rather than charging the higher GIC for that earlier period, SIC applies at a lower rate to recognise that the taxpayer may not have known the assessment required adjustment.
Once the amended assessment becomes payable, however, unpaid amounts generally become subject to GIC instead.
Key Differences Between GIC and SIC
Although both are interest charges, they apply for different reasons.
| General Interest Charge (GIC) | Shortfall Interest Charge (SIC) |
|---|---|
| Applies after a tax debt becomes overdue | Applies for the period between when the shortfall would have been due and when the amendment is issued. |
| Encourages timely payment of tax debts | Compensates for underpaid tax before reassessment |
| Usually charged at a higher rate | Usually charged at a lower rate |
| Continues daily until the debt is paid | Stops when the amended assessment is issued |
| Applies to many different ATO debts | Only applies to tax shortfalls resulting in amended assessments |
How Each Charge Is Calculated
Understanding how each interest charge is calculated helps explain why the final interest amount can differ significantly.
General Interest Charge Calculation
The General Interest Charge compounds daily on the outstanding tax debt.
The formula is:
| Daily GIC = Outstanding Tax Debt × (Annual GIC Rate ÷ 365) |
The daily interest is then added to the outstanding balance, meaning interest is charged on both the original debt and previously accrued interest.
Suppose your business owes $100,000 in unpaid tax.
Current GIC Rate: 11.43% per annum (As of July 2026*)
= $100,000 × (11.43% ÷ 365)
= $100,000 × 0.0003132
= $31.32 per day
If the debt remains unpaid, the interest compounds daily, meaning the amount charged gradually increases because interest is calculated on the growing balance.
Shortfall Interest Charge Calculation
The Shortfall Interest Charge is calculated differently.
Rather than applying to overdue tax debts, SIC applies to the amount of tax that was underpaid before the ATO issued an amended assessment.
The formula is:
| Daily SIC = Tax Shortfall × (Annual SIC Rate ÷ 365) |
Unlike GIC, SIC is only calculated for the period between when the shortfall would have been due and when the amendment is issued.
Assume the ATO determines your tax return understated your tax liability by $50,000.
Current SIC Rate: 7.43% per annum (As of July 2026*)
= $50,000 × (7.43% ÷ 365)
= $50,000 × 0.0002036
= $10.18 per day
If the amended assessment covers a period of 120 days, the SIC would be approximately:
$10.18 × 120 = $1,221.60
If that amended assessment is not paid by the due date (21 days after the ATO issues the notice of amended assessment), the outstanding balance generally becomes subject to the General Interest Charge, which is charged at the higher GIC rate from that point onwards.
*For the current quarterly GIC and SIC rates, please refer to the ATO website.
Can You Get Either Charge Remitted?
Yes. The ATO has the discretion to remit both the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC), but the circumstances it considers are different.
Remission is never automatic. You must ask the ATO to reduce or cancel the interest, and each request is assessed on its own facts.
Can the ATO Remit the General Interest Charge?
Yes. The ATO explains it is generally more likely to remit GIC where circumstances outside your control prevented you from meeting your tax obligations. Your compliance history is also considered. If you normally lodge and pay your taxes on time, but an unexpected event caused a late payment, your request is more likely to succeed.
Examples where the ATO is more likely to approve GIC remission include:
- Natural disasters such as floods, bushfires or drought affecting you or your tax or BAS agent.
- Industrial action that prevented you or your tax or BAS agent from meeting your obligations.
- The unforeseen collapse of a major debtor.
- Sudden illness of a sole trader, key employee or business owner.
- Sudden illness of your tax or BAS agent where it was not practical to make alternative arrangements.
- Theft of, or damage to, property critical to your business operations.
- Financial abuse, coercive control, family or domestic violence, or other circumstances that created significant vulnerability.
- The death of an immediate family member.
When is GIC Remission Unlikely?
The ATO is generally less likely to remit GIC where the interest arose because of ordinary commercial risks or business decisions.
Examples include:
- Cash flow problems caused by adverse trading conditions.
- A general economic downturn.
- Currency or exchange rate fluctuations.
- Customers paying invoices late.
- Choosing to use available funds to expand your business instead of paying tax debts.
- Not giving your tax or BAS agent enough time to prepare and lodge returns.
- Being on holiday when your tax payment or lodgment was due.
Can the ATO Remit the Shortfall Interest Charge?
Yes, although the considerations are different.
Unlike GIC, the law requires the Commissioner to consider whether it is fair and reasonable for the Commonwealth to bear some or all of the cost of the delayed tax payment. The ATO looks closely at what caused the shortfall and whether factors outside your control contributed to the amount of SIC that accrued.
The ATO may consider remitting SIC where:
- There was an unreasonable delay by the ATO in commencing or completing an audit or review.
- The ATO contributed to the delay that caused additional SIC to accrue.
- The shortfall was paid before the amended assessment was issued.
- Factors outside your control significantly increased the size of the shortfall or the period over which SIC accrued.
- You made an unprompted voluntary disclosure before the ATO commenced compliance action.
- You reasonably relied on incorrect ATO advice or an administrative practice that was later found to be incorrect.
The ATO considers each request individually and weighs the specific facts of the case. Even where remission is granted, it may only reduce part of the SIC rather than the entire amount.
How to Request Remission
If you believe your circumstances warrant remission, you can apply directly to the ATO. Supporting evidence will strengthen your request and may include:
- Medical certificates.
- Insurance reports.
- Evidence of natural disasters or business disruption.
- Correspondence with the ATO.
- Financial records.
- Police reports or court documents where relevant.
- Letters from your tax adviser explaining the circumstances.
If your request is successful, the ATO may reduce or cancel part of the interest charged.
How Paying Off Tax Debt Stops Both Charges Accruing
Interest charges can quickly become one of the most expensive parts of an ATO debt.
While the original tax liability remains fixed unless amended, GIC continues to compound daily on unpaid amounts. Every additional day increases the total amount payable.
Clearing the outstanding debt stops further GIC from accruing.
Businesses generally have several options, including:
- Paying the debt in full with cash reserves.
- Entering into an ATO payment arrangement.
- Refinancing the tax debt through external finance.
For many businesses, refinancing provides greater flexibility than an ATO payment plan.
Tax debt loans allow businesses to pay the ATO immediately, preventing further General Interest Charges from accumulating. Instead of managing a debt that grows every day, repayments are made under agreed loan terms that may better suit the business’s cash flow. Depending on the lender and your circumstances, funding solutions are available for a wide range of tax debts, including GST, PAYG and superannuation obligations.
If your business is finding it difficult to keep up with ATO payments, addressing the debt early can significantly reduce the total cost over time.
Frequently Asked Questions
The ATO applies the Shortfall Interest Charge when an amended tax assessment results in additional tax being payable. SIC covers the period between the original assessment and the amended assessment. If the SIC remains unpaid 21 days after the amended assessment, any unpaid balance generally becomes subject to the General Interest Charge instead.
Yes. The SIC rate is generally lower than the GIC rate.
This reflects the different purpose of each charge. SIC compensates the ATO for the period between the original assessment and when the amended assessment is issued, while GIC encourages taxpayers to pay outstanding debts promptly after they become due.
Yes. A taxpayer may incur both charges on the same tax liability, but they apply during different periods.
SIC applies while the tax shortfall existed before the amended assessment. If the SIC is not paid by the due date, GIC begins accruing on the unpaid amount from that point onwards.
Yes, although remission is not automatic. The ATO may remit some or all of the Shortfall Interest Charge where exceptional circumstances exist or where applying the full amount would be considered unfair. Each request is assessed individually.
The Shortfall Interest Charge (SIC) is calculated using the following formula:
Daily SIC = Tax Shortfall × (Annual SIC Rate ÷ 365)
The ATO applies this daily interest to the amount of tax that was underpaid from the original payment due date until the day before the amended assessment is issued. The current SIC rate is 7.43% per annum. If the amended assessment is not paid by its due date, the outstanding balance will generally begin attracting the higher General Interest Charge (GIC).
To Sum it Up
Understanding the difference between GIC and SIC ATO charges makes it easier to respond appropriately when the ATO issues an assessment or payment notice.
The General Interest Charge applies once a tax debt becomes overdue and continues compounding daily until the balance is paid. The Shortfall Interest Charge applies earlier, covering the period where additional tax should have been paid before an amended assessment is issued.
Although the two charges serve different purposes, both increase the overall cost of unresolved tax obligations. Acting quickly can reduce the amount of interest that accumulates and improve your options for managing the debt.
If you’re unsure which charge applies to your circumstances, reviewing your ATO notice carefully or seeking professional advice can help you understand your obligations and identify the most suitable path forward.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Explore Finance That Can Stop Daily GIC Charges
If your ATO debt is continuing to attract General Interest Charges, waiting often makes the problem more expensive.
At Dark Horse Financial, we regularly help businesses access flexible tax debt finance that can be used to pay outstanding ATO liabilities, helping stop additional GIC from accruing.
Our team understands that every business is different. We’ll assess your situation, explain your funding options, and connect you with lenders that can help you resolve your tax debt.
Speak with Dark Horse Financial today to explore your tax debt finance options.
